Correlation Between Vietnam Petroleum and Vietnam Rubber

Can any of the company-specific risk be diversified away by investing in both Vietnam Petroleum and Vietnam Rubber 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 Vietnam Rubber 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 Vietnam Rubber Group, you can compare the effects of market volatilities on Vietnam Petroleum and Vietnam Rubber 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 Vietnam Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vietnam Petroleum and Vietnam Rubber.

Diversification Opportunities for Vietnam Petroleum and Vietnam Rubber

0.59

Correlation Coefficient

Vietnam Petroleum  Vietnam Rubber

Very weak diversification

The 3 months correlation between Vietnam and Vietnam is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Vietnam Petroleum Transport and Vietnam Rubber Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vietnam Rubber Group 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 Vietnam Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vietnam Rubber Group has no effect on the direction of Vietnam Petroleum i.e., Vietnam Petroleum and Vietnam Rubber go up and down completely randomly.

Pair Corralation between Vietnam Petroleum and Vietnam Rubber

Assuming the 90 days trading horizon Vietnam Petroleum is expected to generate 4.23 times less return on investment than Vietnam Rubber. In addition to that, Vietnam Petroleum is 1.1 times more volatile than Vietnam Rubber Group. It trades about 0.03 of its total potential returns per unit of risk. Vietnam Rubber Group is currently generating about 0.15 per unit of volatility. If you would invest  3,055,000  in Vietnam Rubber Group on December 30, 2024 and sell it today you would earn a total of  425,000  from holding Vietnam Rubber Group or generate 13.91% return on investment over 90 days.

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

Vietnam Petroleum Transport  vs.  Vietnam Rubber Group

Vietnam Petroleum

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vietnam Petroleum Transport are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Vietnam Petroleum is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Vietnam Rubber Group

Risk-Adjusted Performance

Good

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

Pair Trading with Vietnam Petroleum and Vietnam Rubber

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

The idea behind Vietnam Petroleum Transport and Vietnam Rubber Group 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.