Correlation Between Mekong Fisheries and Saigon Machinery

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

Diversification Opportunities for Mekong Fisheries and Saigon Machinery

-0.58

Correlation Coefficient

Mekong Fisheries  Saigon Machinery

Excellent diversification

The 3 months correlation between Mekong and Saigon is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Mekong Fisheries JSC and Saigon Machinery Spare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saigon Machinery Spare 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 Saigon Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saigon Machinery Spare has no effect on the direction of Mekong Fisheries i.e., Mekong Fisheries and Saigon Machinery go up and down completely randomly.

Pair Corralation between Mekong Fisheries and Saigon Machinery

Assuming the 90 days trading horizon Mekong Fisheries is expected to generate 9.45 times less return on investment than Saigon Machinery. In addition to that, Mekong Fisheries is 1.17 times more volatile than Saigon Machinery Spare. It trades about 0.08 of its total potential returns per unit of risk. Saigon Machinery Spare is currently generating about 0.87 per unit of volatility. If you would invest  1,015,000  in Saigon Machinery Spare on September 20, 2024 and sell it today you would earn a total of  125,000  from holding Saigon Machinery Spare or generate 12.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	22.73%
Values	Daily Returns

Mekong Fisheries JSC  vs.  Saigon Machinery Spare

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 very healthy primary indicators, Mekong Fisheries is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Saigon Machinery Spare

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Saigon Machinery Spare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very unfluctuating basic indicators, Saigon Machinery displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mekong Fisheries and Saigon Machinery

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

The idea behind Mekong Fisheries JSC and Saigon Machinery Spare 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.