Correlation Between Damsan JSC and Thong Nhat

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

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

Diversification Opportunities for Damsan JSC and Thong Nhat

0.25

Correlation Coefficient

Damsan JSC  Thong Nhat

Modest diversification

The 3 months correlation between Damsan and Thong is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Damsan JSC and Thong Nhat Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thong Nhat Rubber 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 Thong Nhat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thong Nhat Rubber has no effect on the direction of Damsan JSC i.e., Damsan JSC and Thong Nhat go up and down completely randomly.

Pair Corralation between Damsan JSC and Thong Nhat

Assuming the 90 days trading horizon Damsan JSC is expected to generate 1.94 times less return on investment than Thong Nhat. But when comparing it to its historical volatility, Damsan JSC is 3.28 times less risky than Thong Nhat. It trades about 0.05 of its potential returns per unit of risk. Thong Nhat Rubber is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,350,000  in Thong Nhat Rubber on December 27, 2024 and sell it today you would earn a total of  35,000  from holding Thong Nhat Rubber or generate 1.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	74.14%
Values	Daily Returns

Damsan JSC  vs.  Thong Nhat Rubber

Damsan JSC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Damsan JSC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Damsan JSC is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Thong Nhat Rubber

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Thong Nhat Rubber are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Thong Nhat may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Damsan JSC and Thong Nhat

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

The idea behind Damsan JSC and Thong Nhat Rubber 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.