Correlation Between Dong Nai and Nafoods Group

Can any of the company-specific risk be diversified away by investing in both Dong Nai and Nafoods Group 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 Nafoods Group 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 Nafoods Group JSC, you can compare the effects of market volatilities on Dong Nai and Nafoods Group 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 Nafoods Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dong Nai and Nafoods Group.

Diversification Opportunities for Dong Nai and Nafoods Group

-0.6

Correlation Coefficient

Dong Nai  Nafoods Group

Excellent diversification

The 3 months correlation between Dong and Nafoods is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Dong Nai Plastic and Nafoods Group JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nafoods Group 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 Nafoods Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nafoods Group JSC has no effect on the direction of Dong Nai i.e., Dong Nai and Nafoods Group go up and down completely randomly.

Pair Corralation between Dong Nai and Nafoods Group

Assuming the 90 days trading horizon Dong Nai is expected to generate 2.45 times less return on investment than Nafoods Group. In addition to that, Dong Nai is 2.03 times more volatile than Nafoods Group JSC. It trades about 0.01 of its total potential returns per unit of risk. Nafoods Group JSC is currently generating about 0.04 per unit of volatility. If you would invest  1,965,000  in Nafoods Group JSC on December 29, 2024 and sell it today you would earn a total of  55,000  from holding Nafoods Group JSC or generate 2.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	77.97%
Values	Daily Returns

Dong Nai Plastic  vs.  Nafoods Group JSC

Dong Nai Plastic

Risk-Adjusted Performance

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.

Nafoods Group JSC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nafoods Group JSC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Nafoods Group is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Dong Nai and Nafoods Group

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

The idea behind Dong Nai Plastic and Nafoods Group 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.