Correlation Between South Basic and Vietnam Rubber

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

Diversification Opportunities for South Basic and Vietnam Rubber

-0.09

Correlation Coefficient

South Basic  Vietnam Rubber

Good diversification

The 3 months correlation between South and Vietnam is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding South Basic Chemicals and Vietnam Rubber Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vietnam Rubber Group 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 Vietnam Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vietnam Rubber Group has no effect on the direction of South Basic i.e., South Basic and Vietnam Rubber go up and down completely randomly.

Pair Corralation between South Basic and Vietnam Rubber

Assuming the 90 days trading horizon South Basic is expected to generate 15.67 times less return on investment than Vietnam Rubber. In addition to that, South Basic is 1.31 times more volatile than Vietnam Rubber Group. It trades about 0.02 of its total potential returns per unit of risk. Vietnam Rubber Group is currently generating about 0.48 per unit of volatility. If you would invest  2,880,000  in Vietnam Rubber Group on December 10, 2024 and sell it today you would earn a total of  450,000  from holding Vietnam Rubber Group or generate 15.63% return on investment over 90 days.

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

South Basic Chemicals  vs.  Vietnam Rubber Group

South Basic Chemicals

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in South Basic Chemicals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, South Basic may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Vietnam Rubber Group

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vietnam Rubber Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Vietnam Rubber may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with South Basic and Vietnam Rubber

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

The idea behind South Basic Chemicals and Vietnam Rubber Group 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 Anywhere module to track or share privately all of your investments from the convenience of any device.