Correlation Between Vietnam National and Petrolimex Information

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

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

Diversification Opportunities for Vietnam National and Petrolimex Information

0.21

Correlation Coefficient

Vietnam National  Petrolimex Information

Modest diversification

The 3 months correlation between Vietnam and Petrolimex is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Vietnam National Reinsurance and Petrolimex Information Technol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrolimex Information and Vietnam National 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 National Reinsurance are associated (or correlated) with Petrolimex Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrolimex Information has no effect on the direction of Vietnam National i.e., Vietnam National and Petrolimex Information go up and down completely randomly.

Pair Corralation between Vietnam National and Petrolimex Information

Assuming the 90 days trading horizon Vietnam National is expected to generate 14.11 times less return on investment than Petrolimex Information. But when comparing it to its historical volatility, Vietnam National Reinsurance is 3.78 times less risky than Petrolimex Information. It trades about 0.0 of its potential returns per unit of risk. Petrolimex Information Technology is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,730,000  in Petrolimex Information Technology on September 30, 2024 and sell it today you would lose (20,000) from holding Petrolimex Information Technology or give up 0.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	61.54%
Values	Daily Returns

Vietnam National Reinsurance  vs.  Petrolimex Information Technol

Vietnam National Rei

Risk-Adjusted Performance

0 of 100

Very Weak

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

Petrolimex Information

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Vietnam National and Petrolimex Information

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

The idea behind Vietnam National Reinsurance and Petrolimex Information Technology 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.