Correlation Between Damsan JSC and BaoMinh Insurance

Can any of the company-specific risk be diversified away by investing in both Damsan JSC and BaoMinh Insurance 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 Damsan JSC and BaoMinh Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Damsan JSC and BaoMinh Insurance Corp, you can compare the effects of market volatilities on Damsan JSC and BaoMinh Insurance 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 Damsan JSC with a short position of BaoMinh Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Damsan JSC and BaoMinh Insurance.

Diversification Opportunities for Damsan JSC and BaoMinh Insurance

0.58

Correlation Coefficient

Damsan JSC  BaoMinh Insurance

Very weak diversification

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

Pair Corralation between Damsan JSC and BaoMinh Insurance

Assuming the 90 days trading horizon Damsan JSC is expected to generate 0.87 times more return on investment than BaoMinh Insurance. However, Damsan JSC is 1.15 times less risky than BaoMinh Insurance. It trades about -0.07 of its potential returns per unit of risk. BaoMinh Insurance Corp is currently generating about -0.07 per unit of risk. If you would invest  987,000  in Damsan JSC on September 13, 2024 and sell it today you would lose (74,000) from holding Damsan JSC or give up 7.5% of portfolio value over 90 days.

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

Damsan JSC  vs.  BaoMinh Insurance Corp

Damsan JSC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Damsan JSC 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.

BaoMinh Insurance Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BaoMinh Insurance Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's forward 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 Damsan JSC and BaoMinh Insurance

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

The idea behind Damsan JSC and BaoMinh Insurance Corp 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.