Correlation Between Dong Nai and Sao Vang

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

Diversification Opportunities for Dong Nai and Sao Vang

0.03

Correlation Coefficient

Dong Nai  Sao Vang

Significant diversification

The 3 months correlation between Dong and Sao is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Dong Nai Plastic and Sao Vang Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sao Vang Rubber 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 Sao Vang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sao Vang Rubber has no effect on the direction of Dong Nai i.e., Dong Nai and Sao Vang go up and down completely randomly.

Pair Corralation between Dong Nai and Sao Vang

Assuming the 90 days trading horizon Dong Nai Plastic is expected to generate 1.03 times more return on investment than Sao Vang. However, Dong Nai is 1.03 times more volatile than Sao Vang Rubber. It trades about -0.04 of its potential returns per unit of risk. Sao Vang Rubber is currently generating about -0.08 per unit of risk. If you would invest  2,290,000  in Dong Nai Plastic on September 4, 2024 and sell it today you would lose (240,000) from holding Dong Nai Plastic or give up 10.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.73%
Values	Daily Returns

Dong Nai Plastic  vs.  Sao Vang Rubber

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 latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Sao Vang Rubber

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sao Vang Rubber has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Dong Nai and Sao Vang

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

The idea behind Dong Nai Plastic and Sao Vang Rubber 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.