Correlation Between BIDV Insurance and Phuoc Hoa

Can any of the company-specific risk be diversified away by investing in both BIDV Insurance and Phuoc Hoa 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 BIDV Insurance and Phuoc Hoa into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BIDV Insurance Corp and Phuoc Hoa Rubber, you can compare the effects of market volatilities on BIDV Insurance and Phuoc Hoa 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 BIDV Insurance with a short position of Phuoc Hoa. Check out your portfolio center. Please also check ongoing floating volatility patterns of BIDV Insurance and Phuoc Hoa.

Diversification Opportunities for BIDV Insurance and Phuoc Hoa

0.66

Correlation Coefficient

BIDV Insurance  Phuoc Hoa

Poor diversification

The 3 months correlation between BIDV and Phuoc is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding BIDV Insurance Corp and Phuoc Hoa Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phuoc Hoa Rubber and BIDV Insurance 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 BIDV Insurance Corp are associated (or correlated) with Phuoc Hoa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phuoc Hoa Rubber has no effect on the direction of BIDV Insurance i.e., BIDV Insurance and Phuoc Hoa go up and down completely randomly.

Pair Corralation between BIDV Insurance and Phuoc Hoa

Assuming the 90 days trading horizon BIDV Insurance is expected to generate 7.73 times less return on investment than Phuoc Hoa. But when comparing it to its historical volatility, BIDV Insurance Corp is 1.46 times less risky than Phuoc Hoa. It trades about 0.04 of its potential returns per unit of risk. Phuoc Hoa Rubber is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  5,280,000  in Phuoc Hoa Rubber on December 28, 2024 and sell it today you would earn a total of  1,420,000  from holding Phuoc Hoa Rubber or generate 26.89% return on investment over 90 days.

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

BIDV Insurance Corp  vs.  Phuoc Hoa Rubber

BIDV Insurance Corp

Risk-Adjusted Performance

Insignificant

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

Phuoc Hoa Rubber

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Phuoc Hoa Rubber are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Phuoc Hoa displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BIDV Insurance and Phuoc Hoa

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

The idea behind BIDV Insurance Corp and Phuoc Hoa 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.