Correlation Between Ba Ria and Da Nang

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

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

Diversification Opportunities for Ba Ria and Da Nang

-0.14

Correlation Coefficient

Ba Ria  Da Nang

Good diversification

The 3 months correlation between BTP and DXV is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Ba Ria Thermal 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 Ba Ria 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 Ba Ria Thermal 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 Ba Ria i.e., Ba Ria and Da Nang go up and down completely randomly.

Pair Corralation between Ba Ria and Da Nang

Assuming the 90 days trading horizon Ba Ria is expected to generate 1.12 times less return on investment than Da Nang. But when comparing it to its historical volatility, Ba Ria Thermal is 1.93 times less risky than Da Nang. It trades about 0.02 of its potential returns per unit of risk. Da Nang Construction is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  390,000  in Da Nang Construction on September 16, 2024 and sell it today you would lose (17,000) from holding Da Nang Construction or give up 4.36% of portfolio value over 90 days.

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

Ba Ria Thermal  vs.  Da Nang Construction

Ba Ria Thermal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ba Ria Thermal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Da Nang Construction

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ba Ria and Da Nang

The main advantage of trading using opposite Ba Ria and Da Nang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ba Ria 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 Ba Ria Thermal 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.

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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.