Correlation Between Danang Rubber and Tien Giang

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

Diversification Opportunities for Danang Rubber and Tien Giang

-0.2

Correlation Coefficient

Danang Rubber  Tien Giang

Good diversification

The 3 months correlation between Danang and Tien is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Danang Rubber JSC and Tien Giang Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tien Giang Investment 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 Tien Giang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tien Giang Investment has no effect on the direction of Danang Rubber i.e., Danang Rubber and Tien Giang go up and down completely randomly.

Pair Corralation between Danang Rubber and Tien Giang

Assuming the 90 days trading horizon Danang Rubber is expected to generate 26.16 times less return on investment than Tien Giang. But when comparing it to its historical volatility, Danang Rubber JSC is 1.93 times less risky than Tien Giang. It trades about 0.02 of its potential returns per unit of risk. Tien Giang Investment is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  4,352,200  in Tien Giang Investment on December 4, 2024 and sell it today you would earn a total of  1,757,800  from holding Tien Giang Investment or generate 40.39% return on investment over 90 days.

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

Danang Rubber JSC  vs.  Tien Giang Investment

Danang Rubber JSC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Danang Rubber JSC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Tien Giang Investment

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tien Giang Investment are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Tien Giang displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Danang Rubber and Tien Giang

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

The idea behind Danang Rubber JSC and Tien Giang Investment 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.