Correlation Between Viet Thanh and Pacific Petroleum

Can any of the company-specific risk be diversified away by investing in both Viet Thanh and Pacific Petroleum 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 Viet Thanh and Pacific Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Viet Thanh Plastic and Pacific Petroleum Transportation, you can compare the effects of market volatilities on Viet Thanh and Pacific Petroleum 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 Viet Thanh with a short position of Pacific Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Viet Thanh and Pacific Petroleum.

Diversification Opportunities for Viet Thanh and Pacific Petroleum

0.55

Correlation Coefficient

Viet Thanh  Pacific Petroleum

Very weak diversification

The 3 months correlation between Viet and Pacific is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Viet Thanh Plastic and Pacific Petroleum Transportati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Petroleum and Viet Thanh 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 Viet Thanh Plastic are associated (or correlated) with Pacific Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Petroleum has no effect on the direction of Viet Thanh i.e., Viet Thanh and Pacific Petroleum go up and down completely randomly.

Pair Corralation between Viet Thanh and Pacific Petroleum

Assuming the 90 days trading horizon Viet Thanh Plastic is expected to generate 0.83 times more return on investment than Pacific Petroleum. However, Viet Thanh Plastic is 1.2 times less risky than Pacific Petroleum. It trades about 0.07 of its potential returns per unit of risk. Pacific Petroleum Transportation is currently generating about 0.05 per unit of risk. If you would invest  1,620,000  in Viet Thanh Plastic on October 26, 2024 and sell it today you would earn a total of  90,000  from holding Viet Thanh Plastic or generate 5.56% return on investment over 90 days.

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

Viet Thanh Plastic  vs.  Pacific Petroleum Transportati

Viet Thanh Plastic

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Viet Thanh Plastic are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Viet Thanh is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pacific Petroleum

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pacific Petroleum Transportation are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Pacific Petroleum is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Viet Thanh and Pacific Petroleum

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

The idea behind Viet Thanh Plastic and Pacific Petroleum Transportation 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.