Correlation Between Da Nang and Binhthuan Agriculture

Can any of the company-specific risk be diversified away by investing in both Da Nang and Binhthuan Agriculture 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 Da Nang and Binhthuan Agriculture into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Da Nang Construction and Binhthuan Agriculture Services, you can compare the effects of market volatilities on Da Nang and Binhthuan Agriculture 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 Da Nang with a short position of Binhthuan Agriculture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Da Nang and Binhthuan Agriculture.

Diversification Opportunities for Da Nang and Binhthuan Agriculture

-0.33

Correlation Coefficient

Da Nang  Binhthuan Agriculture

Very good diversification

The 3 months correlation between DXV and Binhthuan is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Da Nang Construction and Binhthuan Agriculture Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Binhthuan Agriculture and Da Nang 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 Da Nang Construction are associated (or correlated) with Binhthuan Agriculture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Binhthuan Agriculture has no effect on the direction of Da Nang i.e., Da Nang and Binhthuan Agriculture go up and down completely randomly.

Pair Corralation between Da Nang and Binhthuan Agriculture

Assuming the 90 days trading horizon Da Nang Construction is expected to generate 1.39 times more return on investment than Binhthuan Agriculture. However, Da Nang is 1.39 times more volatile than Binhthuan Agriculture Services. It trades about 0.04 of its potential returns per unit of risk. Binhthuan Agriculture Services is currently generating about -0.09 per unit of risk. If you would invest  373,000  in Da Nang Construction on December 21, 2024 and sell it today you would earn a total of  16,000  from holding Da Nang Construction or generate 4.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.28%
Values	Daily Returns

Da Nang Construction  vs.  Binhthuan Agriculture Services

Da Nang Construction

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Da Nang Construction are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Da Nang may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Binhthuan Agriculture

Risk-Adjusted Performance

Very Weak

Over the last 90 days Binhthuan Agriculture Services 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.

Pair Trading with Da Nang and Binhthuan Agriculture

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

The idea behind Da Nang Construction and Binhthuan Agriculture Services 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.