Correlation Between Damsan JSC and Ho Chi

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

By analyzing existing cross correlation between Damsan JSC and Ho Chi Minh, you can compare the effects of market volatilities on Damsan JSC and Ho Chi 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 Ho Chi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Damsan JSC and Ho Chi.

Diversification Opportunities for Damsan JSC and Ho Chi

0.61

Correlation Coefficient

Damsan JSC  Ho Chi

Poor diversification

The 3 months correlation between Damsan and HDB is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Damsan JSC and Ho Chi Minh in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ho Chi Minh 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 Ho Chi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ho Chi Minh has no effect on the direction of Damsan JSC i.e., Damsan JSC and Ho Chi go up and down completely randomly.

Pair Corralation between Damsan JSC and Ho Chi

Assuming the 90 days trading horizon Damsan JSC is expected to under-perform the Ho Chi. But the stock apears to be less risky and, when comparing its historical volatility, Damsan JSC is 1.49 times less risky than Ho Chi. The stock trades about -0.1 of its potential returns per unit of risk. The Ho Chi Minh is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,765,000  in Ho Chi Minh on October 3, 2024 and sell it today you would lose (15,000) from holding Ho Chi Minh or give up 0.54% of portfolio value over 90 days.

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

Damsan JSC  vs.  Ho Chi Minh

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 weak 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.

Ho Chi Minh

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Damsan JSC and Ho Chi

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

The idea behind Damsan JSC and Ho Chi Minh 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.