Correlation Between Ben Thanh and Vietnam Construction

Can any of the company-specific risk be diversified away by investing in both Ben Thanh and Vietnam Construction 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 Vietnam Construction 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 Vietnam Construction JSC, you can compare the effects of market volatilities on Ben Thanh and Vietnam Construction 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 Vietnam Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ben Thanh and Vietnam Construction.

Diversification Opportunities for Ben Thanh and Vietnam Construction

-0.51

Correlation Coefficient

Ben Thanh  Vietnam Construction

Excellent diversification

The 3 months correlation between Ben and Vietnam is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Ben Thanh Rubber and Vietnam Construction JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vietnam Construction JSC 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 Vietnam Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vietnam Construction JSC has no effect on the direction of Ben Thanh i.e., Ben Thanh and Vietnam Construction go up and down completely randomly.

Pair Corralation between Ben Thanh and Vietnam Construction

Assuming the 90 days trading horizon Ben Thanh Rubber is expected to generate 1.36 times more return on investment than Vietnam Construction. However, Ben Thanh is 1.36 times more volatile than Vietnam Construction JSC. It trades about 0.08 of its potential returns per unit of risk. Vietnam Construction JSC is currently generating about 0.02 per unit of risk. If you would invest  776,921  in Ben Thanh Rubber on October 11, 2024 and sell it today you would earn a total of  668,079  from holding Ben Thanh Rubber or generate 85.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.11%
Values	Daily Returns

Ben Thanh Rubber  vs.  Vietnam Construction JSC

Ben Thanh Rubber

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ben Thanh Rubber are ranked lower than 14 (%) 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.

Vietnam Construction JSC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vietnam Construction JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Vietnam Construction 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 Vietnam Construction

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

The idea behind Ben Thanh Rubber and Vietnam Construction JSC 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..