Correlation Between South Basic and Binh Thuan

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

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

Diversification Opportunities for South Basic and Binh Thuan

-0.34

Correlation Coefficient

South Basic  Binh Thuan

Very good diversification

The 3 months correlation between South and Binh is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding South Basic Chemicals and Binh Thuan Books in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Binh Thuan Books and South Basic 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 South Basic Chemicals are associated (or correlated) with Binh Thuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Binh Thuan Books has no effect on the direction of South Basic i.e., South Basic and Binh Thuan go up and down completely randomly.

Pair Corralation between South Basic and Binh Thuan

Assuming the 90 days trading horizon South Basic Chemicals is expected to under-perform the Binh Thuan. In addition to that, South Basic is 1.43 times more volatile than Binh Thuan Books. It trades about -0.05 of its total potential returns per unit of risk. Binh Thuan Books is currently generating about 0.0 per unit of volatility. If you would invest  1,750,435  in Binh Thuan Books on October 7, 2024 and sell it today you would lose (350,435) from holding Binh Thuan Books or give up 20.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	64.63%
Values	Daily Returns

South Basic Chemicals  vs.  Binh Thuan Books

South Basic Chemicals

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in South Basic Chemicals are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, South Basic displayed solid returns over the last few months and may actually be approaching a breakup point.

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 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 South Basic and Binh Thuan

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

The idea behind South Basic Chemicals and Binh Thuan Books 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.