Correlation Between Ben Thanh and SMC Investment

Can any of the company-specific risk be diversified away by investing in both Ben Thanh and SMC Investment 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 Ben Thanh and SMC Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ben Thanh Rubber and SMC Investment Trading, you can compare the effects of market volatilities on Ben Thanh and SMC Investment 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 Ben Thanh with a short position of SMC Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ben Thanh and SMC Investment.

Diversification Opportunities for Ben Thanh and SMC Investment

0.39

Correlation Coefficient

Ben Thanh  SMC Investment

Weak diversification

The 3 months correlation between Ben and SMC is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Ben Thanh Rubber and SMC Investment Trading in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMC Investment Trading and Ben Thanh 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 Ben Thanh Rubber are associated (or correlated) with SMC Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMC Investment Trading has no effect on the direction of Ben Thanh i.e., Ben Thanh and SMC Investment go up and down completely randomly.

Pair Corralation between Ben Thanh and SMC Investment

Assuming the 90 days trading horizon Ben Thanh Rubber is expected to generate 0.32 times more return on investment than SMC Investment. However, Ben Thanh Rubber is 3.12 times less risky than SMC Investment. It trades about 0.16 of its potential returns per unit of risk. SMC Investment Trading is currently generating about 0.01 per unit of risk. If you would invest  1,335,000  in Ben Thanh Rubber on October 24, 2024 and sell it today you would earn a total of  135,000  from holding Ben Thanh Rubber or generate 10.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Ben Thanh Rubber  vs.  SMC Investment Trading

Ben Thanh Rubber

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ben Thanh Rubber are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Ben Thanh may actually be approaching a critical reversion point that can send shares even higher in February 2025.

SMC Investment Trading

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days SMC Investment Trading has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, SMC Investment is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ben Thanh and SMC Investment

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

The idea behind Ben Thanh Rubber and SMC Investment Trading 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.