Correlation Between South Basic and Duc Thanh

Can any of the company-specific risk be diversified away by investing in both South Basic and Duc Thanh 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 Duc Thanh 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 Duc Thanh Wood, you can compare the effects of market volatilities on South Basic and Duc Thanh 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 Duc Thanh. Check out your portfolio center. Please also check ongoing floating volatility patterns of South Basic and Duc Thanh.

Diversification Opportunities for South Basic and Duc Thanh

0.51

Correlation Coefficient

South Basic  Duc Thanh

Very weak diversification

The 3 months correlation between South and Duc is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding South Basic Chemicals and Duc Thanh Wood in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duc Thanh Wood 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 Duc Thanh. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duc Thanh Wood has no effect on the direction of South Basic i.e., South Basic and Duc Thanh go up and down completely randomly.

Pair Corralation between South Basic and Duc Thanh

Assuming the 90 days trading horizon South Basic Chemicals is expected to generate 1.59 times more return on investment than Duc Thanh. However, South Basic is 1.59 times more volatile than Duc Thanh Wood. It trades about -0.13 of its potential returns per unit of risk. Duc Thanh Wood is currently generating about -0.25 per unit of risk. If you would invest  4,660,000  in South Basic Chemicals on December 25, 2024 and sell it today you would lose (590,000) from holding South Basic Chemicals or give up 12.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

South Basic Chemicals  vs.  Duc Thanh Wood

South Basic Chemicals

Risk-Adjusted Performance

Very Weak

Over the last 90 days South Basic Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Duc Thanh Wood

Risk-Adjusted Performance

Very Weak

Over the last 90 days Duc Thanh Wood 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 April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with South Basic and Duc Thanh

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

The idea behind South Basic Chemicals and Duc Thanh Wood 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.