Correlation Between Mekong Fisheries and Binhthuan Agriculture

Can any of the company-specific risk be diversified away by investing in both Mekong Fisheries and Binhthuan Agriculture 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 Mekong Fisheries and Binhthuan Agriculture into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mekong Fisheries JSC and Binhthuan Agriculture Services, you can compare the effects of market volatilities on Mekong Fisheries and Binhthuan Agriculture 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 Mekong Fisheries with a short position of Binhthuan Agriculture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mekong Fisheries and Binhthuan Agriculture.

Diversification Opportunities for Mekong Fisheries and Binhthuan Agriculture

0.8

Correlation Coefficient

Mekong Fisheries  Binhthuan Agriculture

Very poor diversification

The 3 months correlation between Mekong and Binhthuan is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Mekong Fisheries JSC and Binhthuan Agriculture Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Binhthuan Agriculture and Mekong Fisheries 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 Mekong Fisheries JSC are associated (or correlated) with Binhthuan Agriculture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Binhthuan Agriculture has no effect on the direction of Mekong Fisheries i.e., Mekong Fisheries and Binhthuan Agriculture go up and down completely randomly.

Pair Corralation between Mekong Fisheries and Binhthuan Agriculture

Assuming the 90 days trading horizon Mekong Fisheries JSC is expected to under-perform the Binhthuan Agriculture. In addition to that, Mekong Fisheries is 1.98 times more volatile than Binhthuan Agriculture Services. It trades about -0.05 of its total potential returns per unit of risk. Binhthuan Agriculture Services is currently generating about -0.1 per unit of volatility. If you would invest  431,000  in Binhthuan Agriculture Services on August 30, 2024 and sell it today you would lose (36,000) from holding Binhthuan Agriculture Services or give up 8.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

Mekong Fisheries JSC  vs.  Binhthuan Agriculture Services

Mekong Fisheries JSC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Binhthuan Agriculture

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Mekong Fisheries and Binhthuan Agriculture

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

The idea behind Mekong Fisheries JSC and Binhthuan Agriculture Services 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.