Correlation Between Tay Ninh and Pacific Petroleum

Can any of the company-specific risk be diversified away by investing in both Tay Ninh and Pacific Petroleum 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 Tay Ninh and Pacific Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tay Ninh Rubber and Pacific Petroleum Transportation, you can compare the effects of market volatilities on Tay Ninh and Pacific Petroleum 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 Tay Ninh with a short position of Pacific Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tay Ninh and Pacific Petroleum.

Diversification Opportunities for Tay Ninh and Pacific Petroleum

0.73

Correlation Coefficient

Tay Ninh  Pacific Petroleum

Poor diversification

The 3 months correlation between Tay and Pacific is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Tay Ninh Rubber and Pacific Petroleum Transportati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Petroleum and Tay Ninh 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 Tay Ninh Rubber are associated (or correlated) with Pacific Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Petroleum has no effect on the direction of Tay Ninh i.e., Tay Ninh and Pacific Petroleum go up and down completely randomly.

Pair Corralation between Tay Ninh and Pacific Petroleum

Assuming the 90 days trading horizon Tay Ninh is expected to generate 2.41 times less return on investment than Pacific Petroleum. In addition to that, Tay Ninh is 1.42 times more volatile than Pacific Petroleum Transportation. It trades about 0.09 of its total potential returns per unit of risk. Pacific Petroleum Transportation is currently generating about 0.3 per unit of volatility. If you would invest  1,650,000  in Pacific Petroleum Transportation on October 6, 2024 and sell it today you would earn a total of  160,000  from holding Pacific Petroleum Transportation or generate 9.7% return on investment over 90 days.

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

Tay Ninh Rubber  vs.  Pacific Petroleum Transportati

Tay Ninh Rubber

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tay Ninh Rubber are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Tay Ninh displayed solid returns over the last few months and may actually be approaching a breakup point.

Pacific Petroleum

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pacific Petroleum Transportation are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Pacific Petroleum displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tay Ninh and Pacific Petroleum

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

The idea behind Tay Ninh Rubber and Pacific Petroleum Transportation 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..