Correlation Between Dong A and VICS

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

By analyzing existing cross correlation between Dong A Hotel and VICS, you can compare the effects of market volatilities on Dong A and VICS 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 Dong A with a short position of VICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dong A and VICS.

Diversification Opportunities for Dong A and VICS

0.41

Correlation Coefficient

Dong A  VICS

Very weak diversification

The 3 months correlation between Dong and VICS is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Dong A Hotel and VICS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VICS and Dong A 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 Dong A Hotel are associated (or correlated) with VICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VICS has no effect on the direction of Dong A i.e., Dong A and VICS go up and down completely randomly.

Pair Corralation between Dong A and VICS

Assuming the 90 days trading horizon Dong A Hotel is expected to under-perform the VICS. But the stock apears to be less risky and, when comparing its historical volatility, Dong A Hotel is 1.07 times less risky than VICS. The stock trades about -0.04 of its potential returns per unit of risk. The VICS is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  600,000  in VICS on December 25, 2024 and sell it today you would earn a total of  110,000  from holding VICS or generate 18.33% return on investment over 90 days.

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

Dong A Hotel  vs.  VICS

Dong A Hotel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dong A Hotel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Dong A is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

VICS

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VICS are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, VICS displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dong A and VICS

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

The idea behind Dong A Hotel and VICS 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.