Correlation Between Ducgiang Chemicals and Saigon Machinery

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

By analyzing existing cross correlation between Ducgiang Chemicals Detergent and Saigon Machinery Spare, you can compare the effects of market volatilities on Ducgiang Chemicals and Saigon Machinery 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 Ducgiang Chemicals with a short position of Saigon Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ducgiang Chemicals and Saigon Machinery.

Diversification Opportunities for Ducgiang Chemicals and Saigon Machinery

-0.29

Correlation Coefficient

Ducgiang Chemicals  Saigon Machinery

Very good diversification

The 3 months correlation between Ducgiang and Saigon is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Ducgiang Chemicals Detergent and Saigon Machinery Spare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saigon Machinery Spare and Ducgiang Chemicals 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 Ducgiang Chemicals Detergent are associated (or correlated) with Saigon Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saigon Machinery Spare has no effect on the direction of Ducgiang Chemicals i.e., Ducgiang Chemicals and Saigon Machinery go up and down completely randomly.

Pair Corralation between Ducgiang Chemicals and Saigon Machinery

Assuming the 90 days trading horizon Ducgiang Chemicals Detergent is expected to under-perform the Saigon Machinery. But the stock apears to be less risky and, when comparing its historical volatility, Ducgiang Chemicals Detergent is 5.33 times less risky than Saigon Machinery. The stock trades about -0.16 of its potential returns per unit of risk. The Saigon Machinery Spare is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,140,000  in Saigon Machinery Spare on December 22, 2024 and sell it today you would lose (55,000) from holding Saigon Machinery Spare or give up 4.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	41.67%
Values	Daily Returns

Ducgiang Chemicals Detergent  vs.  Saigon Machinery Spare

Ducgiang Chemicals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ducgiang Chemicals Detergent has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Saigon Machinery Spare

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Ducgiang Chemicals and Saigon Machinery

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

The idea behind Ducgiang Chemicals Detergent and Saigon Machinery Spare 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.