Correlation Between Binhthuan Agriculture and Vietnam Construction

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

Diversification Opportunities for Binhthuan Agriculture and Vietnam Construction

0.73

Correlation Coefficient

Binhthuan Agriculture  Vietnam Construction

Poor diversification

The 3 months correlation between Binhthuan and Vietnam is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Binhthuan Agriculture Services and Vietnam Construction JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vietnam Construction JSC 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 Vietnam Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vietnam Construction JSC has no effect on the direction of Binhthuan Agriculture i.e., Binhthuan Agriculture and Vietnam Construction go up and down completely randomly.

Pair Corralation between Binhthuan Agriculture and Vietnam Construction

Assuming the 90 days trading horizon Binhthuan Agriculture Services is expected to under-perform the Vietnam Construction. In addition to that, Binhthuan Agriculture is 2.05 times more volatile than Vietnam Construction JSC. It trades about -0.1 of its total potential returns per unit of risk. Vietnam Construction JSC is currently generating about -0.06 per unit of volatility. If you would invest  2,930,000  in Vietnam Construction JSC on September 1, 2024 and sell it today you would lose (70,000) from holding Vietnam Construction JSC or give up 2.39% of portfolio value over 90 days.

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

Binhthuan Agriculture Services  vs.  Vietnam Construction JSC

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.

Vietnam Construction JSC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Binhthuan Agriculture and Vietnam Construction

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

The idea behind Binhthuan Agriculture Services and Vietnam Construction JSC 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.