Correlation Between Vietnam Petroleum and Binhthuan Agriculture

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

By analyzing existing cross correlation between Vietnam Petroleum Transport and Binhthuan Agriculture Services, you can compare the effects of market volatilities on Vietnam Petroleum and Binhthuan Agriculture 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 Vietnam Petroleum with a short position of Binhthuan Agriculture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vietnam Petroleum and Binhthuan Agriculture.

Diversification Opportunities for Vietnam Petroleum and Binhthuan Agriculture

0.56

Correlation Coefficient

Vietnam Petroleum  Binhthuan Agriculture

Very weak diversification

The 3 months correlation between Vietnam and Binhthuan is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Vietnam Petroleum Transport and Binhthuan Agriculture Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Binhthuan Agriculture and Vietnam Petroleum 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 Vietnam Petroleum Transport are associated (or correlated) with Binhthuan Agriculture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Binhthuan Agriculture has no effect on the direction of Vietnam Petroleum i.e., Vietnam Petroleum and Binhthuan Agriculture go up and down completely randomly.

Pair Corralation between Vietnam Petroleum and Binhthuan Agriculture

Assuming the 90 days trading horizon Vietnam Petroleum is expected to generate 1.18 times less return on investment than Binhthuan Agriculture. But when comparing it to its historical volatility, Vietnam Petroleum Transport is 1.32 times less risky than Binhthuan Agriculture. It trades about 0.12 of its potential returns per unit of risk. Binhthuan Agriculture Services is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  432,000  in Binhthuan Agriculture Services on September 26, 2024 and sell it today you would earn a total of  69,000  from holding Binhthuan Agriculture Services or generate 15.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Vietnam Petroleum Transport  vs.  Binhthuan Agriculture Services

Vietnam Petroleum

Risk-Adjusted Performance

9 of 100

OK

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

Binhthuan Agriculture

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Binhthuan Agriculture Services are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Binhthuan Agriculture displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vietnam Petroleum and Binhthuan Agriculture

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

The idea behind Vietnam Petroleum Transport and Binhthuan Agriculture Services 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.