Correlation Between Binhthuan Agriculture and DIC Holdings

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

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

Diversification Opportunities for Binhthuan Agriculture and DIC Holdings

-0.41

Correlation Coefficient

Binhthuan Agriculture  DIC Holdings

Very good diversification

The 3 months correlation between Binhthuan and DIC is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Binhthuan Agriculture Services and DIC Holdings Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DIC Holdings Construction and Binhthuan Agriculture 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 Binhthuan Agriculture Services are associated (or correlated) with DIC Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DIC Holdings Construction has no effect on the direction of Binhthuan Agriculture i.e., Binhthuan Agriculture and DIC Holdings go up and down completely randomly.

Pair Corralation between Binhthuan Agriculture and DIC Holdings

Assuming the 90 days trading horizon Binhthuan Agriculture Services is expected to under-perform the DIC Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Binhthuan Agriculture Services is 1.89 times less risky than DIC Holdings. The stock trades about -0.11 of its potential returns per unit of risk. The DIC Holdings Construction is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,130,000  in DIC Holdings Construction on September 4, 2024 and sell it today you would earn a total of  400,000  from holding DIC Holdings Construction or generate 35.4% return on investment over 90 days.

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

Binhthuan Agriculture Services  vs.  DIC Holdings Construction

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.

DIC Holdings Construction

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DIC Holdings Construction are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, DIC Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Binhthuan Agriculture and DIC Holdings

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

The idea behind Binhthuan Agriculture Services and DIC Holdings Construction 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.