Correlation Between Tin Nghia and PetroVietnam Drilling

Can any of the company-specific risk be diversified away by investing in both Tin Nghia and PetroVietnam Drilling at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Tin Nghia and PetroVietnam Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tin Nghia Industrial and PetroVietnam Drilling Well, you can compare the effects of market volatilities on Tin Nghia and PetroVietnam Drilling and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Tin Nghia with a short position of PetroVietnam Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tin Nghia and PetroVietnam Drilling.

Diversification Opportunities for Tin Nghia and PetroVietnam Drilling

0.72

Correlation Coefficient

Tin Nghia  PetroVietnam Drilling

Poor diversification

The 3 months correlation between Tin and PetroVietnam is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Tin Nghia Industrial and PetroVietnam Drilling Well in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroVietnam Drilling and Tin Nghia is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Tin Nghia Industrial are associated (or correlated) with PetroVietnam Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetroVietnam Drilling has no effect on the direction of Tin Nghia i.e., Tin Nghia and PetroVietnam Drilling go up and down completely randomly.

Pair Corralation between Tin Nghia and PetroVietnam Drilling

Assuming the 90 days trading horizon Tin Nghia Industrial is expected to generate 0.56 times more return on investment than PetroVietnam Drilling. However, Tin Nghia Industrial is 1.8 times less risky than PetroVietnam Drilling. It trades about 0.31 of its potential returns per unit of risk. PetroVietnam Drilling Well is currently generating about -0.1 per unit of risk. If you would invest  2,150,000  in Tin Nghia Industrial on September 17, 2024 and sell it today you would earn a total of  135,000  from holding Tin Nghia Industrial or generate 6.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Tin Nghia Industrial  vs.  PetroVietnam Drilling Well

Tin Nghia Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tin Nghia Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Tin Nghia is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

PetroVietnam Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PetroVietnam Drilling Well has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Tin Nghia and PetroVietnam Drilling

The main advantage of trading using opposite Tin Nghia and PetroVietnam Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tin Nghia position performs unexpectedly, PetroVietnam Drilling can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in PetroVietnam Drilling will offset losses from the drop in PetroVietnam Drilling's long position.

The idea behind Tin Nghia Industrial and PetroVietnam Drilling Well pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Transaction History module to view history of all your transactions and understand their impact on performance.