Correlation Between PetroVietnam Transportation and Pha Lai

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

Diversification Opportunities for PetroVietnam Transportation and Pha Lai

0.55

Correlation Coefficient

PetroVietnam Transportation  Pha Lai

Very weak diversification

The 3 months correlation between PetroVietnam and Pha is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding PetroVietnam Transportation Co 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 Transportation 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 Transportation Corp 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 Transportation i.e., PetroVietnam Transportation and Pha Lai go up and down completely randomly.

Pair Corralation between PetroVietnam Transportation and Pha Lai

Assuming the 90 days trading horizon PetroVietnam Transportation Corp is expected to generate 0.78 times more return on investment than Pha Lai. However, PetroVietnam Transportation Corp is 1.28 times less risky than Pha Lai. It trades about -0.01 of its potential returns per unit of risk. Pha Lai Thermal is currently generating about -0.01 per unit of risk. If you would invest  2,750,000  in PetroVietnam Transportation Corp on September 14, 2024 and sell it today you would lose (40,000) from holding PetroVietnam Transportation Corp or give up 1.45% of portfolio value over 90 days.

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

PetroVietnam Transportation Co  vs.  Pha Lai Thermal

PetroVietnam Transportation

Risk-Adjusted Performance

0 of 100

Very Weak

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

The main advantage of trading using opposite PetroVietnam Transportation and Pha Lai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PetroVietnam Transportation 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 Transportation Corp 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.