Correlation Between Binh Duong and Danang Port

Can any of the company-specific risk be diversified away by investing in both Binh Duong and Danang Port 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 Binh Duong and Danang Port into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Binh Duong Construction and Danang Port JSC, you can compare the effects of market volatilities on Binh Duong and Danang Port 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 Binh Duong with a short position of Danang Port. Check out your portfolio center. Please also check ongoing floating volatility patterns of Binh Duong and Danang Port.

Diversification Opportunities for Binh Duong and Danang Port

0.86

Correlation Coefficient

Binh Duong  Danang Port

Very poor diversification

The 3 months correlation between Binh and Danang is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Binh Duong Construction and Danang Port JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danang Port JSC and Binh Duong 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 Binh Duong Construction are associated (or correlated) with Danang Port. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danang Port JSC has no effect on the direction of Binh Duong i.e., Binh Duong and Danang Port go up and down completely randomly.

Pair Corralation between Binh Duong and Danang Port

Assuming the 90 days trading horizon Binh Duong is expected to generate 1.08 times less return on investment than Danang Port. But when comparing it to its historical volatility, Binh Duong Construction is 1.37 times less risky than Danang Port. It trades about 0.05 of its potential returns per unit of risk. Danang Port JSC is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,498,891  in Danang Port JSC on October 10, 2024 and sell it today you would earn a total of  901,109  from holding Danang Port JSC or generate 36.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	89.0%
Values	Daily Returns

Binh Duong Construction  vs.  Danang Port JSC

Binh Duong Construction

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Binh Duong Construction are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Binh Duong displayed solid returns over the last few months and may actually be approaching a breakup point.

Danang Port JSC

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Danang Port JSC are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Danang Port displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Binh Duong and Danang Port

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

The idea behind Binh Duong Construction and Danang Port 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.