Correlation Between Dong Nai and Vietnam Airlines

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

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

Diversification Opportunities for Dong Nai and Vietnam Airlines

-0.62

Correlation Coefficient

Dong Nai  Vietnam Airlines

Excellent diversification

The 3 months correlation between Dong and Vietnam is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Dong Nai Plastic and Vietnam Airlines JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vietnam Airlines JSC and Dong Nai 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 Nai Plastic are associated (or correlated) with Vietnam Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vietnam Airlines JSC has no effect on the direction of Dong Nai i.e., Dong Nai and Vietnam Airlines go up and down completely randomly.

Pair Corralation between Dong Nai and Vietnam Airlines

Assuming the 90 days trading horizon Dong Nai Plastic is expected to generate 0.85 times more return on investment than Vietnam Airlines. However, Dong Nai Plastic is 1.18 times less risky than Vietnam Airlines. It trades about -0.06 of its potential returns per unit of risk. Vietnam Airlines JSC is currently generating about -0.19 per unit of risk. If you would invest  2,080,000  in Dong Nai Plastic on October 25, 2024 and sell it today you would lose (40,000) from holding Dong Nai Plastic or give up 1.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	71.43%
Values	Daily Returns

Dong Nai Plastic  vs.  Vietnam Airlines JSC

Dong Nai Plastic

Risk-Adjusted Performance

0 of 100

Very Weak

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

Vietnam Airlines JSC

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vietnam Airlines JSC are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Vietnam Airlines displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dong Nai and Vietnam Airlines

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

The idea behind Dong Nai Plastic and Vietnam Airlines 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.

Check out your portfolio center.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.