Correlation Between Vietnam Petroleum and Binh Duong

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

Diversification Opportunities for Vietnam Petroleum and Binh Duong

0.63

Correlation Coefficient

Vietnam Petroleum  Binh Duong

Poor diversification

The 3 months correlation between Vietnam and Binh is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Vietnam Petroleum Transport and Binh Duong Trade in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Binh Duong Trade 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 Binh Duong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Binh Duong Trade has no effect on the direction of Vietnam Petroleum i.e., Vietnam Petroleum and Binh Duong go up and down completely randomly.

Pair Corralation between Vietnam Petroleum and Binh Duong

Assuming the 90 days trading horizon Vietnam Petroleum is expected to generate 2.75 times less return on investment than Binh Duong. But when comparing it to its historical volatility, Vietnam Petroleum Transport is 1.18 times less risky than Binh Duong. It trades about 0.08 of its potential returns per unit of risk. Binh Duong Trade is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,025,000  in Binh Duong Trade on December 4, 2024 and sell it today you would earn a total of  235,000  from holding Binh Duong Trade or generate 22.93% return on investment over 90 days.

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

Vietnam Petroleum Transport  vs.  Binh Duong Trade

Vietnam Petroleum

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vietnam Petroleum Transport are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Vietnam Petroleum may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Binh Duong Trade

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Binh Duong Trade are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Binh Duong displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vietnam Petroleum and Binh Duong

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

The idea behind Vietnam Petroleum Transport and Binh Duong Trade 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.