Correlation Between Binh Duong and Dong Nai

Can any of the company-specific risk be diversified away by investing in both Binh Duong and Dong Nai 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 Dong Nai 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 Dong Nai Plastic, you can compare the effects of market volatilities on Binh Duong and Dong Nai 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 Dong Nai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Binh Duong and Dong Nai.

Diversification Opportunities for Binh Duong and Dong Nai

-0.53

Correlation Coefficient

Binh Duong  Dong Nai

Excellent diversification

The 3 months correlation between Binh and Dong is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Binh Duong Construction and Dong Nai Plastic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dong Nai Plastic 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 Dong Nai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dong Nai Plastic has no effect on the direction of Binh Duong i.e., Binh Duong and Dong Nai go up and down completely randomly.

Pair Corralation between Binh Duong and Dong Nai

Assuming the 90 days trading horizon Binh Duong Construction is expected to generate 0.57 times more return on investment than Dong Nai. However, Binh Duong Construction is 1.75 times less risky than Dong Nai. It trades about 0.04 of its potential returns per unit of risk. Dong Nai Plastic is currently generating about 0.0 per unit of risk. If you would invest  565,000  in Binh Duong Construction on September 15, 2024 and sell it today you would earn a total of  150,000  from holding Binh Duong Construction or generate 26.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	83.74%
Values	Daily Returns

Binh Duong Construction  vs.  Dong Nai Plastic

Binh Duong Construction

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Binh Duong Construction are ranked lower than 22 (%) 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.

Dong Nai Plastic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dong Nai Plastic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Binh Duong and Dong Nai

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

The idea behind Binh Duong Construction and Dong Nai Plastic 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 Anywhere module to track or share privately all of your investments from the convenience of any device.