Correlation Between Bao Ngoc and Lien Viet

Can any of the company-specific risk be diversified away by investing in both Bao Ngoc and Lien Viet 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 Lien Viet 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 Lien Viet Post, you can compare the effects of market volatilities on Bao Ngoc and Lien Viet 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 Lien Viet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bao Ngoc and Lien Viet.

Diversification Opportunities for Bao Ngoc and Lien Viet

-0.03

Correlation Coefficient

Bao Ngoc  Lien Viet

Good diversification

The 3 months correlation between Bao and Lien is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Bao Ngoc Investment and Lien Viet Post in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lien Viet Post 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 Lien Viet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lien Viet Post has no effect on the direction of Bao Ngoc i.e., Bao Ngoc and Lien Viet go up and down completely randomly.

Pair Corralation between Bao Ngoc and Lien Viet

Assuming the 90 days trading horizon Bao Ngoc is expected to generate 12.99 times less return on investment than Lien Viet. But when comparing it to its historical volatility, Bao Ngoc Investment is 1.31 times less risky than Lien Viet. It trades about 0.01 of its potential returns per unit of risk. Lien Viet Post is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,756,849  in Lien Viet Post on October 26, 2024 and sell it today you would earn a total of  828,151  from holding Lien Viet Post or generate 30.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Bao Ngoc Investment  vs.  Lien Viet Post

Bao Ngoc Investment

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bao Ngoc Investment are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Bao Ngoc is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Lien Viet Post

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lien Viet Post are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental drivers, Lien Viet displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bao Ngoc and Lien Viet

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

The idea behind Bao Ngoc Investment and Lien Viet Post 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.