Correlation Between Vietnam Petroleum and Tay Ninh

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

Diversification Opportunities for Vietnam Petroleum and Tay Ninh

0.72

Correlation Coefficient

Vietnam Petroleum  Tay Ninh

Poor diversification

The 3 months correlation between Vietnam and Tay is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Vietnam Petroleum Transport and Tay Ninh Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tay Ninh Rubber 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 Tay Ninh. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tay Ninh Rubber has no effect on the direction of Vietnam Petroleum i.e., Vietnam Petroleum and Tay Ninh go up and down completely randomly.

Pair Corralation between Vietnam Petroleum and Tay Ninh

Assuming the 90 days trading horizon Vietnam Petroleum Transport is expected to under-perform the Tay Ninh. But the stock apears to be less risky and, when comparing its historical volatility, Vietnam Petroleum Transport is 1.78 times less risky than Tay Ninh. The stock trades about -0.01 of its potential returns per unit of risk. The Tay Ninh Rubber is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  5,140,000  in Tay Ninh Rubber on December 22, 2024 and sell it today you would earn a total of  2,820,000  from holding Tay Ninh Rubber or generate 54.86% 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.  Tay Ninh Rubber

Vietnam Petroleum

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vietnam Petroleum Transport has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Tay Ninh Rubber

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tay Ninh Rubber are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Tay Ninh displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vietnam Petroleum and Tay Ninh

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

The idea behind Vietnam Petroleum Transport and Tay Ninh Rubber 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .