Correlation Between Danang Rubber and Sao Ta

Can any of the company-specific risk be diversified away by investing in both Danang Rubber and Sao Ta 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 Danang Rubber and Sao Ta into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Danang Rubber JSC and Sao Ta Foods, you can compare the effects of market volatilities on Danang Rubber and Sao Ta 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 Danang Rubber with a short position of Sao Ta. Check out your portfolio center. Please also check ongoing floating volatility patterns of Danang Rubber and Sao Ta.

Diversification Opportunities for Danang Rubber and Sao Ta

0.47

Correlation Coefficient

Danang Rubber  Sao Ta

Very weak diversification

The 3 months correlation between Danang and Sao is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Danang Rubber JSC and Sao Ta Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sao Ta Foods and Danang Rubber 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 Danang Rubber JSC are associated (or correlated) with Sao Ta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sao Ta Foods has no effect on the direction of Danang Rubber i.e., Danang Rubber and Sao Ta go up and down completely randomly.

Pair Corralation between Danang Rubber and Sao Ta

Assuming the 90 days trading horizon Danang Rubber JSC is expected to generate 1.33 times more return on investment than Sao Ta. However, Danang Rubber is 1.33 times more volatile than Sao Ta Foods. It trades about 0.06 of its potential returns per unit of risk. Sao Ta Foods is currently generating about 0.06 per unit of risk. If you would invest  1,754,778  in Danang Rubber JSC on October 4, 2024 and sell it today you would earn a total of  1,095,222  from holding Danang Rubber JSC or generate 62.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Danang Rubber JSC  vs.  Sao Ta Foods

Danang Rubber JSC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sao Ta Foods

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sao Ta Foods are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Sao Ta is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Danang Rubber and Sao Ta

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

The idea behind Danang Rubber JSC and Sao Ta Foods 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.