Correlation Between Petrolimex Insurance and Lam Dong

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

By analyzing existing cross correlation between Petrolimex Insurance Corp and Lam Dong Pharmaceutical, you can compare the effects of market volatilities on Petrolimex Insurance and Lam Dong 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 Petrolimex Insurance with a short position of Lam Dong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petrolimex Insurance and Lam Dong.

Diversification Opportunities for Petrolimex Insurance and Lam Dong

0.46

Correlation Coefficient

Petrolimex Insurance  Lam Dong

Very weak diversification

The 3 months correlation between Petrolimex and Lam is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Petrolimex Insurance Corp and Lam Dong Pharmaceutical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lam Dong Pharmaceutical and Petrolimex Insurance 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 Petrolimex Insurance Corp are associated (or correlated) with Lam Dong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lam Dong Pharmaceutical has no effect on the direction of Petrolimex Insurance i.e., Petrolimex Insurance and Lam Dong go up and down completely randomly.

Pair Corralation between Petrolimex Insurance and Lam Dong

Assuming the 90 days trading horizon Petrolimex Insurance is expected to generate 92.83 times less return on investment than Lam Dong. But when comparing it to its historical volatility, Petrolimex Insurance Corp is 1.68 times less risky than Lam Dong. It trades about 0.0 of its potential returns per unit of risk. Lam Dong Pharmaceutical is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  540,000  in Lam Dong Pharmaceutical on September 29, 2024 and sell it today you would earn a total of  470,000  from holding Lam Dong Pharmaceutical or generate 87.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	76.63%
Values	Daily Returns

Petrolimex Insurance Corp  vs.  Lam Dong Pharmaceutical

Petrolimex Insurance Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Lam Dong Pharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lam Dong Pharmaceutical 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 basic 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 Petrolimex Insurance and Lam Dong

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

The idea behind Petrolimex Insurance Corp and Lam Dong Pharmaceutical 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.