Correlation Between DIC Holdings and FPT Digital

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

By analyzing existing cross correlation between DIC Holdings Construction and FPT Digital Retail, you can compare the effects of market volatilities on DIC Holdings and FPT Digital 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 DIC Holdings with a short position of FPT Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of DIC Holdings and FPT Digital.

Diversification Opportunities for DIC Holdings and FPT Digital

-0.64

Correlation Coefficient

DIC Holdings  FPT Digital

Excellent diversification

The 3 months correlation between DIC and FPT is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding DIC Holdings Construction and FPT Digital Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FPT Digital Retail and DIC Holdings 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 DIC Holdings Construction are associated (or correlated) with FPT Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FPT Digital Retail has no effect on the direction of DIC Holdings i.e., DIC Holdings and FPT Digital go up and down completely randomly.

Pair Corralation between DIC Holdings and FPT Digital

Assuming the 90 days trading horizon DIC Holdings Construction is expected to under-perform the FPT Digital. In addition to that, DIC Holdings is 1.76 times more volatile than FPT Digital Retail. It trades about -0.03 of its total potential returns per unit of risk. FPT Digital Retail is currently generating about 0.0 per unit of volatility. If you would invest  18,100,000  in FPT Digital Retail on December 5, 2024 and sell it today you would lose (150,000) from holding FPT Digital Retail or give up 0.83% of portfolio value over 90 days.

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

DIC Holdings Construction  vs.  FPT Digital Retail

DIC Holdings Construction

Risk-Adjusted Performance

Very Weak

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

FPT Digital Retail

Risk-Adjusted Performance

Very Weak

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

Pair Trading with DIC Holdings and FPT Digital

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

The idea behind DIC Holdings Construction and FPT Digital Retail 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.