Correlation Between Vina2 Investment and PetroVietnam Transportation

Can any of the company-specific risk be diversified away by investing in both Vina2 Investment 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 Vina2 Investment and PetroVietnam Transportation into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vina2 Investment and and PetroVietnam Transportation Corp, you can compare the effects of market volatilities on Vina2 Investment 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 Vina2 Investment with a short position of PetroVietnam Transportation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vina2 Investment and PetroVietnam Transportation.

Diversification Opportunities for Vina2 Investment and PetroVietnam Transportation

-0.28

Correlation Coefficient

Vina2 Investment  PetroVietnam Transportation

Very good diversification

The 3 months correlation between Vina2 and PetroVietnam is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Vina2 Investment and and PetroVietnam Transportation Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroVietnam Transportation and Vina2 Investment 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 Vina2 Investment and 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 Vina2 Investment i.e., Vina2 Investment and PetroVietnam Transportation go up and down completely randomly.

Pair Corralation between Vina2 Investment and PetroVietnam Transportation

Assuming the 90 days trading horizon Vina2 Investment and is expected to generate 2.42 times more return on investment than PetroVietnam Transportation. However, Vina2 Investment is 2.42 times more volatile than PetroVietnam Transportation Corp. It trades about 0.02 of its potential returns per unit of risk. PetroVietnam Transportation Corp is currently generating about 0.03 per unit of risk. If you would invest  950,000  in Vina2 Investment and on October 6, 2024 and sell it today you would earn a total of  10,000  from holding Vina2 Investment and or generate 1.05% return on investment over 90 days.

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

Vina2 Investment and  vs.  PetroVietnam Transportation Co

Vina2 Investment

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vina2 Investment and are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Vina2 Investment displayed solid returns over the last few months and may actually be approaching a breakup point.

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 Vina2 Investment and PetroVietnam Transportation

The main advantage of trading using opposite Vina2 Investment and PetroVietnam Transportation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vina2 Investment 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 Vina2 Investment and 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.