Correlation Between Petrovietnam Drilling and Materials Petroleum

Can any of the company-specific risk be diversified away by investing in both Petrovietnam Drilling and Materials 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 Petrovietnam Drilling and Materials Petroleum 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 Materials Petroleum JSC, you can compare the effects of market volatilities on Petrovietnam Drilling and Materials 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 Petrovietnam Drilling with a short position of Materials Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petrovietnam Drilling and Materials Petroleum.

Diversification Opportunities for Petrovietnam Drilling and Materials Petroleum

-0.19

Correlation Coefficient

Petrovietnam Drilling  Materials Petroleum

Good diversification

The 3 months correlation between Petrovietnam and Materials is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Petrovietnam Drilling Mud and Materials Petroleum JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Materials Petroleum JSC 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 Materials Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Materials Petroleum JSC has no effect on the direction of Petrovietnam Drilling i.e., Petrovietnam Drilling and Materials Petroleum go up and down completely randomly.

Pair Corralation between Petrovietnam Drilling and Materials Petroleum

Assuming the 90 days trading horizon Petrovietnam Drilling is expected to generate 3.2 times less return on investment than Materials Petroleum. But when comparing it to its historical volatility, Petrovietnam Drilling Mud is 1.22 times less risky than Materials Petroleum. It trades about 0.08 of its potential returns per unit of risk. Materials Petroleum JSC is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  2,770,000  in Materials Petroleum JSC on September 30, 2024 and sell it today you would earn a total of  160,000  from holding Materials Petroleum JSC or generate 5.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	57.14%
Values	Daily Returns

Petrovietnam Drilling Mud  vs.  Materials Petroleum JSC

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.

Materials Petroleum JSC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Materials Petroleum JSC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Materials Petroleum may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Petrovietnam Drilling and Materials Petroleum

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

The idea behind Petrovietnam Drilling Mud and Materials Petroleum JSC 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.