Correlation Between Tienlen Steel and PetroVietnam Transportation

Can any of the company-specific risk be diversified away by investing in both Tienlen Steel and PetroVietnam Transportation 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 Tienlen Steel and PetroVietnam Transportation into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tienlen Steel Corp and PetroVietnam Transportation Corp, you can compare the effects of market volatilities on Tienlen Steel and PetroVietnam Transportation 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 Tienlen Steel with a short position of PetroVietnam Transportation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tienlen Steel and PetroVietnam Transportation.

Diversification Opportunities for Tienlen Steel and PetroVietnam Transportation

0.72

Correlation Coefficient

Tienlen Steel  PetroVietnam Transportation

Poor diversification

The 3 months correlation between Tienlen and PetroVietnam is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Tienlen Steel Corp and PetroVietnam Transportation Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroVietnam Transportation and Tienlen Steel 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 Tienlen Steel Corp are associated (or correlated) with PetroVietnam Transportation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetroVietnam Transportation has no effect on the direction of Tienlen Steel i.e., Tienlen Steel and PetroVietnam Transportation go up and down completely randomly.

Pair Corralation between Tienlen Steel and PetroVietnam Transportation

Assuming the 90 days trading horizon Tienlen Steel Corp is expected to under-perform the PetroVietnam Transportation. In addition to that, Tienlen Steel is 1.08 times more volatile than PetroVietnam Transportation Corp. It trades about -0.01 of its total potential returns per unit of risk. PetroVietnam Transportation Corp is currently generating about 0.04 per unit of volatility. If you would invest  2,000,202  in PetroVietnam Transportation Corp on September 25, 2024 and sell it today you would earn a total of  759,798  from holding PetroVietnam Transportation Corp or generate 37.99% return on investment over 90 days.

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

Tienlen Steel Corp  vs.  PetroVietnam Transportation Co

Tienlen Steel Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tienlen Steel Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

PetroVietnam Transportation

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Tienlen Steel and PetroVietnam Transportation

The main advantage of trading using opposite Tienlen Steel and PetroVietnam Transportation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tienlen Steel position performs unexpectedly, PetroVietnam Transportation 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 Transportation will offset losses from the drop in PetroVietnam Transportation's long position.

The idea behind Tienlen Steel Corp and PetroVietnam Transportation Corp 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.