Correlation Between Southern Rubber and Tien Phong

Can any of the company-specific risk be diversified away by investing in both Southern Rubber and Tien Phong 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 Southern Rubber and Tien Phong into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Southern Rubber Industry and Tien Phong Plastic, you can compare the effects of market volatilities on Southern Rubber and Tien Phong 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 Southern Rubber with a short position of Tien Phong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Rubber and Tien Phong.

Diversification Opportunities for Southern Rubber and Tien Phong

0.38

Correlation Coefficient

Southern Rubber  Tien Phong

Weak diversification

The 3 months correlation between Southern and Tien is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Southern Rubber Industry and Tien Phong Plastic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tien Phong Plastic and Southern Rubber 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 Southern Rubber Industry are associated (or correlated) with Tien Phong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tien Phong Plastic has no effect on the direction of Southern Rubber i.e., Southern Rubber and Tien Phong go up and down completely randomly.

Pair Corralation between Southern Rubber and Tien Phong

Assuming the 90 days trading horizon Southern Rubber Industry is expected to generate 1.86 times more return on investment than Tien Phong. However, Southern Rubber is 1.86 times more volatile than Tien Phong Plastic. It trades about 0.18 of its potential returns per unit of risk. Tien Phong Plastic is currently generating about 0.26 per unit of risk. If you would invest  1,255,000  in Southern Rubber Industry on September 13, 2024 and sell it today you would earn a total of  140,000  from holding Southern Rubber Industry or generate 11.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Southern Rubber Industry  vs.  Tien Phong Plastic

Southern Rubber Industry

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Rubber Industry are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Southern Rubber may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Tien Phong Plastic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tien Phong Plastic 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.

Pair Trading with Southern Rubber and Tien Phong

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

The idea behind Southern Rubber Industry and Tien Phong Plastic 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.