Correlation Between Petrovietnam Drilling and Bao Ngoc

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

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

Diversification Opportunities for Petrovietnam Drilling and Bao Ngoc

-0.38

Correlation Coefficient

Petrovietnam Drilling  Bao Ngoc

Very good diversification

The 3 months correlation between Petrovietnam and Bao is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Petrovietnam Drilling Mud and Bao Ngoc Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bao Ngoc Investment and Petrovietnam Drilling 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 Petrovietnam Drilling Mud are associated (or correlated) with Bao Ngoc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bao Ngoc Investment has no effect on the direction of Petrovietnam Drilling i.e., Petrovietnam Drilling and Bao Ngoc go up and down completely randomly.

Pair Corralation between Petrovietnam Drilling and Bao Ngoc

Assuming the 90 days trading horizon Petrovietnam Drilling Mud is expected to under-perform the Bao Ngoc. But the stock apears to be less risky and, when comparing its historical volatility, Petrovietnam Drilling Mud is 1.39 times less risky than Bao Ngoc. The stock trades about -0.14 of its potential returns per unit of risk. The Bao Ngoc Investment is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  936,000  in Bao Ngoc Investment on September 29, 2024 and sell it today you would earn a total of  154,000  from holding Bao Ngoc Investment or generate 16.45% return on investment over 90 days.

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

Petrovietnam Drilling Mud  vs.  Bao Ngoc Investment

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.

Bao Ngoc Investment

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bao Ngoc Investment are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Bao Ngoc displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petrovietnam Drilling and Bao Ngoc

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

The idea behind Petrovietnam Drilling Mud and Bao Ngoc Investment 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.