Correlation Between PV2 Investment and Viet Nam

Can any of the company-specific risk be diversified away by investing in both PV2 Investment and Viet Nam 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 PV2 Investment and Viet Nam into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PV2 Investment JSC and Viet Nam Construction, you can compare the effects of market volatilities on PV2 Investment and Viet Nam 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 PV2 Investment with a short position of Viet Nam. Check out your portfolio center. Please also check ongoing floating volatility patterns of PV2 Investment and Viet Nam.

Diversification Opportunities for PV2 Investment and Viet Nam

-0.08

Correlation Coefficient

PV2 Investment  Viet Nam

Good diversification

The 3 months correlation between PV2 and Viet is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding PV2 Investment JSC and Viet Nam Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viet Nam Construction and PV2 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 PV2 Investment JSC are associated (or correlated) with Viet Nam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viet Nam Construction has no effect on the direction of PV2 Investment i.e., PV2 Investment and Viet Nam go up and down completely randomly.

Pair Corralation between PV2 Investment and Viet Nam

Assuming the 90 days trading horizon PV2 Investment JSC is expected to under-perform the Viet Nam. But the stock apears to be less risky and, when comparing its historical volatility, PV2 Investment JSC is 1.46 times less risky than Viet Nam. The stock trades about -0.02 of its potential returns per unit of risk. The Viet Nam Construction is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,240,000  in Viet Nam Construction on September 23, 2024 and sell it today you would lose (40,000) from holding Viet Nam Construction or give up 3.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	36.92%
Values	Daily Returns

PV2 Investment JSC  vs.  Viet Nam Construction

PV2 Investment JSC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PV2 Investment JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, PV2 Investment is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Viet Nam Construction

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with PV2 Investment and Viet Nam

The main advantage of trading using opposite PV2 Investment and Viet Nam positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PV2 Investment position performs unexpectedly, Viet Nam 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 Viet Nam will offset losses from the drop in Viet Nam's long position.

The idea behind PV2 Investment JSC and Viet Nam Construction 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.