Correlation Between PetroVietnam Drilling and APG Securities

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

By analyzing existing cross correlation between PetroVietnam Drilling Well and APG Securities Joint, you can compare the effects of market volatilities on PetroVietnam Drilling and APG Securities 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 APG Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of PetroVietnam Drilling and APG Securities.

Diversification Opportunities for PetroVietnam Drilling and APG Securities

0.78

Correlation Coefficient

PetroVietnam Drilling  APG Securities

Poor diversification

The 3 months correlation between PetroVietnam and APG is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding PetroVietnam Drilling Well and APG Securities Joint in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APG Securities Joint 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 Well are associated (or correlated) with APG Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APG Securities Joint has no effect on the direction of PetroVietnam Drilling i.e., PetroVietnam Drilling and APG Securities go up and down completely randomly.

Pair Corralation between PetroVietnam Drilling and APG Securities

Assuming the 90 days trading horizon PetroVietnam Drilling Well is expected to under-perform the APG Securities. But the stock apears to be less risky and, when comparing its historical volatility, PetroVietnam Drilling Well is 1.01 times less risky than APG Securities. The stock trades about -0.11 of its potential returns per unit of risk. The APG Securities Joint is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  940,000  in APG Securities Joint on September 16, 2024 and sell it today you would lose (40,000) from holding APG Securities Joint or give up 4.26% of portfolio value over 90 days.

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

PetroVietnam Drilling Well  vs.  APG Securities Joint

PetroVietnam Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PetroVietnam Drilling Well has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

APG Securities Joint

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with PetroVietnam Drilling and APG Securities

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

The idea behind PetroVietnam Drilling Well and APG Securities Joint 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.