Correlation Between DOMESCO Medical and Vietnam Construction

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Can any of the company-specific risk be diversified away by investing in both DOMESCO Medical and Vietnam Construction 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 DOMESCO Medical and Vietnam Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DOMESCO Medical Import and Vietnam Construction JSC, you can compare the effects of market volatilities on DOMESCO Medical and Vietnam Construction 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 DOMESCO Medical with a short position of Vietnam Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of DOMESCO Medical and Vietnam Construction.

Diversification Opportunities for DOMESCO Medical and Vietnam Construction

-0.69
  Correlation Coefficient

Excellent diversification

The 3 months correlation between DOMESCO and Vietnam is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding DOMESCO Medical Import and Vietnam Construction JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vietnam Construction JSC and DOMESCO Medical 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 DOMESCO Medical Import are associated (or correlated) with Vietnam Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vietnam Construction JSC has no effect on the direction of DOMESCO Medical i.e., DOMESCO Medical and Vietnam Construction go up and down completely randomly.

Pair Corralation between DOMESCO Medical and Vietnam Construction

Assuming the 90 days trading horizon DOMESCO Medical Import is expected to generate 5.53 times more return on investment than Vietnam Construction. However, DOMESCO Medical is 5.53 times more volatile than Vietnam Construction JSC. It trades about 0.28 of its potential returns per unit of risk. Vietnam Construction JSC is currently generating about -0.09 per unit of risk. If you would invest  6,460,000  in DOMESCO Medical Import on October 25, 2024 and sell it today you would earn a total of  1,250,000  from holding DOMESCO Medical Import or generate 19.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

DOMESCO Medical Import  vs.  Vietnam Construction JSC

 Performance 
       Timeline  
DOMESCO Medical Import 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in DOMESCO Medical Import are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, DOMESCO Medical displayed solid returns over the last few months and may actually be approaching a breakup point.
Vietnam Construction JSC 

Risk-Adjusted Performance

0 of 100

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

DOMESCO Medical and Vietnam Construction Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with DOMESCO Medical and Vietnam Construction

The main advantage of trading using opposite DOMESCO Medical and Vietnam Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DOMESCO Medical position performs unexpectedly, Vietnam Construction 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 Construction will offset losses from the drop in Vietnam Construction's long position.
The idea behind DOMESCO Medical Import and Vietnam Construction JSC 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.

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