Correlation Between Elcom Technology and Vietnam Airlines

Can any of the company-specific risk be diversified away by investing in both Elcom Technology and Vietnam Airlines 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 Elcom Technology and Vietnam Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Elcom Technology Communications and Vietnam Airlines JSC, you can compare the effects of market volatilities on Elcom Technology and Vietnam Airlines 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 Elcom Technology with a short position of Vietnam Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elcom Technology and Vietnam Airlines.

Diversification Opportunities for Elcom Technology and Vietnam Airlines

0.81

Correlation Coefficient

Elcom Technology  Vietnam Airlines

Very poor diversification

The 3 months correlation between Elcom and Vietnam is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Elcom Technology Communication and Vietnam Airlines JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vietnam Airlines JSC and Elcom Technology 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 Elcom Technology Communications are associated (or correlated) with Vietnam Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vietnam Airlines JSC has no effect on the direction of Elcom Technology i.e., Elcom Technology and Vietnam Airlines go up and down completely randomly.

Pair Corralation between Elcom Technology and Vietnam Airlines

Assuming the 90 days trading horizon Elcom Technology Communications is expected to generate 0.9 times more return on investment than Vietnam Airlines. However, Elcom Technology Communications is 1.11 times less risky than Vietnam Airlines. It trades about 0.0 of its potential returns per unit of risk. Vietnam Airlines JSC is currently generating about -0.25 per unit of risk. If you would invest  2,800,000  in Elcom Technology Communications on October 22, 2024 and sell it today you would lose (15,000) from holding Elcom Technology Communications or give up 0.54% of portfolio value over 90 days.

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

Elcom Technology Communication  vs.  Vietnam Airlines JSC

Elcom Technology Com

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Elcom Technology Communications are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Elcom Technology displayed solid returns over the last few months and may actually be approaching a breakup point.

Vietnam Airlines JSC

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vietnam Airlines JSC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Vietnam Airlines displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Elcom Technology and Vietnam Airlines

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

The idea behind Elcom Technology Communications and Vietnam Airlines JSC 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.