Correlation Between Sao Mai and Development Investment

Can any of the company-specific risk be diversified away by investing in both Sao Mai and Development Investment 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 Sao Mai and Development Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sao Mai Group and Development Investment Construction, you can compare the effects of market volatilities on Sao Mai and Development Investment 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 Sao Mai with a short position of Development Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sao Mai and Development Investment.

Diversification Opportunities for Sao Mai and Development Investment

0.18

Correlation Coefficient

Sao Mai  Development Investment

Average diversification

The 3 months correlation between Sao and Development is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Sao Mai Group and Development Investment Constru in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Development Investment and Sao Mai 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 Sao Mai Group are associated (or correlated) with Development Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Development Investment has no effect on the direction of Sao Mai i.e., Sao Mai and Development Investment go up and down completely randomly.

Pair Corralation between Sao Mai and Development Investment

Assuming the 90 days trading horizon Sao Mai Group is expected to generate 0.32 times more return on investment than Development Investment. However, Sao Mai Group is 3.15 times less risky than Development Investment. It trades about -0.01 of its potential returns per unit of risk. Development Investment Construction is currently generating about -0.01 per unit of risk. If you would invest  902,000  in Sao Mai Group on September 13, 2024 and sell it today you would lose (11,000) from holding Sao Mai Group or give up 1.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	75.38%
Values	Daily Returns

Sao Mai Group  vs.  Development Investment Constru

Sao Mai Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Development Investment

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sao Mai and Development Investment

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

The idea behind Sao Mai Group and Development Investment 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.