Correlation Between CMC Investment and Petrovietnam Drilling

Can any of the company-specific risk be diversified away by investing in both CMC Investment and Petrovietnam Drilling 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 CMC Investment and Petrovietnam Drilling into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CMC Investment JSC and Petrovietnam Drilling Mud, you can compare the effects of market volatilities on CMC Investment and Petrovietnam Drilling 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 CMC Investment with a short position of Petrovietnam Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMC Investment and Petrovietnam Drilling.

Diversification Opportunities for CMC Investment and Petrovietnam Drilling

0.8

Correlation Coefficient

CMC Investment  Petrovietnam Drilling

Very poor diversification

The 3 months correlation between CMC and Petrovietnam is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding CMC Investment JSC and Petrovietnam Drilling Mud in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrovietnam Drilling Mud and CMC Investment 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 CMC Investment JSC are associated (or correlated) with Petrovietnam Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrovietnam Drilling Mud has no effect on the direction of CMC Investment i.e., CMC Investment and Petrovietnam Drilling go up and down completely randomly.

Pair Corralation between CMC Investment and Petrovietnam Drilling

Assuming the 90 days trading horizon CMC Investment JSC is expected to generate 2.85 times more return on investment than Petrovietnam Drilling. However, CMC Investment is 2.85 times more volatile than Petrovietnam Drilling Mud. It trades about -0.05 of its potential returns per unit of risk. Petrovietnam Drilling Mud is currently generating about -0.17 per unit of risk. If you would invest  660,000  in CMC Investment JSC on September 29, 2024 and sell it today you would lose (80,000) from holding CMC Investment JSC or give up 12.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	60.0%
Values	Daily Returns

CMC Investment JSC  vs.  Petrovietnam Drilling Mud

CMC Investment JSC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CMC Investment JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Petrovietnam Drilling Mud

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Petrovietnam Drilling Mud has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with CMC Investment and Petrovietnam Drilling

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

The idea behind CMC Investment JSC and Petrovietnam Drilling Mud 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 Commodity Directory module to find actively traded commodities issued by global exchanges.