Correlation Between Bao Ngoc and DIC Holdings

Can any of the company-specific risk be diversified away by investing in both Bao Ngoc and DIC Holdings 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 Bao Ngoc and DIC Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Bao Ngoc and DIC Holdings

-0.18

Correlation Coefficient

Bao Ngoc  DIC Holdings

Good diversification

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

Pair Corralation between Bao Ngoc and DIC Holdings

Assuming the 90 days trading horizon Bao Ngoc Investment is expected to under-perform the DIC Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Bao Ngoc Investment is 1.36 times less risky than DIC Holdings. The stock trades about -0.21 of its potential returns per unit of risk. The DIC Holdings Construction is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,280,500  in DIC Holdings Construction on December 27, 2024 and sell it today you would earn a total of  89,500  from holding DIC Holdings Construction or generate 6.99% return on investment over 90 days.

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

Bao Ngoc Investment  vs.  DIC Holdings Construction

Bao Ngoc Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bao Ngoc Investment 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 April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

DIC Holdings Construction

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DIC Holdings Construction are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, DIC Holdings may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Bao Ngoc and DIC Holdings

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

The idea behind Bao Ngoc Investment and DIC Holdings 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.