Correlation Between Thanh Dat and Dong Nai

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

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

Diversification Opportunities for Thanh Dat and Dong Nai

-0.54

Correlation Coefficient

Thanh Dat  Dong Nai

Excellent diversification

The 3 months correlation between Thanh and Dong is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Thanh Dat Investment and Dong Nai Plastic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dong Nai Plastic and Thanh Dat 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 Thanh Dat Investment are associated (or correlated) with Dong Nai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dong Nai Plastic has no effect on the direction of Thanh Dat i.e., Thanh Dat and Dong Nai go up and down completely randomly.

Pair Corralation between Thanh Dat and Dong Nai

Assuming the 90 days trading horizon Thanh Dat Investment is expected to under-perform the Dong Nai. But the stock apears to be less risky and, when comparing its historical volatility, Thanh Dat Investment is 1.57 times less risky than Dong Nai. The stock trades about -0.01 of its potential returns per unit of risk. The Dong Nai Plastic is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,000,000  in Dong Nai Plastic on September 21, 2024 and sell it today you would earn a total of  80,000  from holding Dong Nai Plastic or generate 4.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	79.25%
Values	Daily Returns

Thanh Dat Investment  vs.  Dong Nai Plastic

Thanh Dat Investment

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Thanh Dat Investment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Thanh Dat may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 unfluctuating performance in the last few months, the Stock's basic 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 Thanh Dat and Dong Nai

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

The idea behind Thanh Dat Investment and Dong Nai Plastic 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.