Correlation Between Da Nang and South Books

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

Diversification Opportunities for Da Nang and South Books

0.48

Correlation Coefficient

Da Nang  South Books

Very weak diversification

The 3 months correlation between DXV and South is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Da Nang Construction and South Books Educational in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South Books Educational 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 South Books. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South Books Educational has no effect on the direction of Da Nang i.e., Da Nang and South Books go up and down completely randomly.

Pair Corralation between Da Nang and South Books

Assuming the 90 days trading horizon Da Nang is expected to generate 2.77 times less return on investment than South Books. In addition to that, Da Nang is 1.07 times more volatile than South Books Educational. It trades about 0.02 of its total potential returns per unit of risk. South Books Educational is currently generating about 0.06 per unit of volatility. If you would invest  1,258,919  in South Books Educational on December 20, 2024 and sell it today you would earn a total of  71,081  from holding South Books Educational or generate 5.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	71.93%
Values	Daily Returns

Da Nang Construction  vs.  South Books Educational

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.

South Books Educational

Risk-Adjusted Performance

Modest

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

Pair Trading with Da Nang and South Books

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

The idea behind Da Nang Construction and South Books Educational 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..