Correlation Between CMC Investment and Khang Dien

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

By analyzing existing cross correlation between CMC Investment JSC and Khang Dien House, you can compare the effects of market volatilities on CMC Investment and Khang Dien 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 CMC Investment with a short position of Khang Dien. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMC Investment and Khang Dien.

Diversification Opportunities for CMC Investment and Khang Dien

-0.2

Correlation Coefficient

CMC Investment  Khang Dien

Good diversification

The 3 months correlation between CMC and Khang is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding CMC Investment JSC and Khang Dien House in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Khang Dien House and CMC Investment 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 CMC Investment JSC are associated (or correlated) with Khang Dien. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Khang Dien House has no effect on the direction of CMC Investment i.e., CMC Investment and Khang Dien go up and down completely randomly.

Pair Corralation between CMC Investment and Khang Dien

Assuming the 90 days trading horizon CMC Investment JSC is expected to generate 6.55 times more return on investment than Khang Dien. However, CMC Investment is 6.55 times more volatile than Khang Dien House. It trades about 0.1 of its potential returns per unit of risk. Khang Dien House is currently generating about -0.16 per unit of risk. If you would invest  580,000  in CMC Investment JSC on December 19, 2024 and sell it today you would earn a total of  120,000  from holding CMC Investment JSC or generate 20.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	79.66%
Values	Daily Returns

CMC Investment JSC  vs.  Khang Dien House

CMC Investment JSC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CMC Investment JSC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, CMC Investment displayed solid returns over the last few months and may actually be approaching a breakup point.

Khang Dien House

Risk-Adjusted Performance

Very Weak

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

Pair Trading with CMC Investment and Khang Dien

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

The idea behind CMC Investment JSC and Khang Dien House 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.