Correlation Between PetroVietnam Transportation and VGS

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

Diversification Opportunities for PetroVietnam Transportation and VGS

0.66

Correlation Coefficient

PetroVietnam Transportation  VGS

Poor diversification

The 3 months correlation between PetroVietnam and VGS is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding PetroVietnam Transportation Co and VGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VGS 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 VGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VGS has no effect on the direction of PetroVietnam Transportation i.e., PetroVietnam Transportation and VGS go up and down completely randomly.

Pair Corralation between PetroVietnam Transportation and VGS

Assuming the 90 days trading horizon PetroVietnam Transportation Corp is expected to generate 0.7 times more return on investment than VGS. However, PetroVietnam Transportation Corp is 1.43 times less risky than VGS. It trades about -0.01 of its potential returns per unit of risk. VGS is currently generating about -0.17 per unit of risk. If you would invest  2,795,000  in PetroVietnam Transportation Corp on September 29, 2024 and sell it today you would lose (25,000) from holding PetroVietnam Transportation Corp or give up 0.89% of portfolio value over 90 days.

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

PetroVietnam Transportation Co  vs.  VGS

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.

VGS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VGS 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 basic 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.

Pair Trading with PetroVietnam Transportation and VGS

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

The idea behind PetroVietnam Transportation Corp and VGS 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.