Correlation Between PetroVietnam Drilling and Pha Lai

Can any of the company-specific risk be diversified away by investing in both PetroVietnam Drilling and Pha Lai 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 Pha Lai 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 Pha Lai Thermal, you can compare the effects of market volatilities on PetroVietnam Drilling and Pha Lai 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 Pha Lai. Check out your portfolio center. Please also check ongoing floating volatility patterns of PetroVietnam Drilling and Pha Lai.

Diversification Opportunities for PetroVietnam Drilling and Pha Lai

0.82

Correlation Coefficient

PetroVietnam Drilling  Pha Lai

Very poor diversification

The 3 months correlation between PetroVietnam and Pha is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding PetroVietnam Drilling Well and Pha Lai Thermal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pha Lai Thermal 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 Pha Lai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pha Lai Thermal has no effect on the direction of PetroVietnam Drilling i.e., PetroVietnam Drilling and Pha Lai go up and down completely randomly.

Pair Corralation between PetroVietnam Drilling and Pha Lai

Assuming the 90 days trading horizon PetroVietnam Drilling Well is expected to generate 1.15 times more return on investment than Pha Lai. However, PetroVietnam Drilling is 1.15 times more volatile than Pha Lai Thermal. It trades about -0.1 of its potential returns per unit of risk. Pha Lai Thermal is currently generating about -0.14 per unit of risk. If you would invest  2,940,000  in PetroVietnam Drilling Well on September 29, 2024 and sell it today you would lose (525,000) from holding PetroVietnam Drilling Well or give up 17.86% of portfolio value over 90 days.

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

PetroVietnam Drilling Well  vs.  Pha Lai Thermal

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 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.

Pha Lai Thermal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pha Lai Thermal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Pha Lai 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 Pha Lai

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

The idea behind PetroVietnam Drilling Well and Pha Lai Thermal 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.