Correlation Between Vietnam Dairy and Petrolimex Petrochemical

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

By analyzing existing cross correlation between Vietnam Dairy Products and Petrolimex Petrochemical JSC, you can compare the effects of market volatilities on Vietnam Dairy and Petrolimex Petrochemical 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 Dairy with a short position of Petrolimex Petrochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vietnam Dairy and Petrolimex Petrochemical.

Diversification Opportunities for Vietnam Dairy and Petrolimex Petrochemical

-0.44

Correlation Coefficient

Vietnam Dairy  Petrolimex Petrochemical

Very good diversification

The 3 months correlation between Vietnam and Petrolimex is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Vietnam Dairy Products and Petrolimex Petrochemical JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrolimex Petrochemical and Vietnam Dairy 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 Dairy Products are associated (or correlated) with Petrolimex Petrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrolimex Petrochemical has no effect on the direction of Vietnam Dairy i.e., Vietnam Dairy and Petrolimex Petrochemical go up and down completely randomly.

Pair Corralation between Vietnam Dairy and Petrolimex Petrochemical

Assuming the 90 days trading horizon Vietnam Dairy Products is expected to under-perform the Petrolimex Petrochemical. But the stock apears to be less risky and, when comparing its historical volatility, Vietnam Dairy Products is 2.35 times less risky than Petrolimex Petrochemical. The stock trades about -0.06 of its potential returns per unit of risk. The Petrolimex Petrochemical JSC is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,100,000  in Petrolimex Petrochemical JSC on December 22, 2024 and sell it today you would earn a total of  370,000  from holding Petrolimex Petrochemical JSC or generate 17.62% return on investment over 90 days.

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

Vietnam Dairy Products  vs.  Petrolimex Petrochemical JSC

Vietnam Dairy Products

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vietnam Dairy Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Vietnam Dairy is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Petrolimex Petrochemical

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Petrolimex Petrochemical JSC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Petrolimex Petrochemical displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vietnam Dairy and Petrolimex Petrochemical

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

The idea behind Vietnam Dairy Products and Petrolimex Petrochemical JSC 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..