Correlation Between Binh Thuan and Da Nang

Can any of the company-specific risk be diversified away by investing in both Binh Thuan and Da Nang 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 Binh Thuan and Da Nang into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Binh Thuan Books and Da Nang Construction, you can compare the effects of market volatilities on Binh Thuan and Da Nang 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 Binh Thuan with a short position of Da Nang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Binh Thuan and Da Nang.

Diversification Opportunities for Binh Thuan and Da Nang

0.06

Correlation Coefficient

Binh Thuan  Da Nang

Significant diversification

The 3 months correlation between Binh and DXV is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Binh Thuan Books and Da Nang Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Da Nang Construction and Binh Thuan 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 Binh Thuan Books are associated (or correlated) with Da Nang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Da Nang Construction has no effect on the direction of Binh Thuan i.e., Binh Thuan and Da Nang go up and down completely randomly.

Pair Corralation between Binh Thuan and Da Nang

Assuming the 90 days trading horizon Binh Thuan is expected to generate 4.71 times less return on investment than Da Nang. In addition to that, Binh Thuan is 1.6 times more volatile than Da Nang Construction. It trades about 0.01 of its total potential returns per unit of risk. Da Nang Construction is currently generating about 0.06 per unit of volatility. If you would invest  392,000  in Da Nang Construction on October 25, 2024 and sell it today you would earn a total of  21,000  from holding Da Nang Construction or generate 5.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	78.57%
Values	Daily Returns

Binh Thuan Books  vs.  Da Nang Construction

Binh Thuan Books

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Binh Thuan Books 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 February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Da Nang Construction

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Da Nang Construction are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Da Nang displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Binh Thuan and Da Nang

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

The idea behind Binh Thuan Books and Da Nang 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.