Correlation Between Da Nang and Binh Thuan

Can any of the company-specific risk be diversified away by investing in both Da Nang and Binh Thuan 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 Binh Thuan 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 Binh Thuan Books, you can compare the effects of market volatilities on Da Nang and Binh Thuan 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 Binh Thuan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Da Nang and Binh Thuan.

Diversification Opportunities for Da Nang and Binh Thuan

0.09

Correlation Coefficient

Da Nang  Binh Thuan

Significant diversification

The 3 months correlation between DXV and Binh is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Da Nang Construction and Binh Thuan Books in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Binh Thuan Books 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 Binh Thuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Binh Thuan Books has no effect on the direction of Da Nang i.e., Da Nang and Binh Thuan go up and down completely randomly.

Pair Corralation between Da Nang and Binh Thuan

Assuming the 90 days trading horizon Da Nang is expected to generate 2.55 times less return on investment than Binh Thuan. But when comparing it to its historical volatility, Da Nang Construction is 1.59 times less risky than Binh Thuan. It trades about 0.02 of its potential returns per unit of risk. Binh Thuan Books is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,324,698  in Binh Thuan Books on December 19, 2024 and sell it today you would earn a total of  35,302  from holding Binh Thuan Books or generate 2.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	77.59%
Values	Daily Returns

Da Nang Construction  vs.  Binh Thuan Books

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 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Da Nang is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Binh Thuan Books

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Binh Thuan Books are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Binh Thuan may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Da Nang and Binh Thuan

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

The idea behind Da Nang Construction and Binh Thuan Books 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 Global Correlations module to find global opportunities by holding instruments from different markets.