Correlation Between Sao Ta and FPT Digital

Can any of the company-specific risk be diversified away by investing in both Sao Ta and FPT Digital 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 Sao Ta and FPT Digital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sao Ta Foods and FPT Digital Retail, you can compare the effects of market volatilities on Sao Ta and FPT Digital 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 Sao Ta with a short position of FPT Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sao Ta and FPT Digital.

Diversification Opportunities for Sao Ta and FPT Digital

-0.4

Correlation Coefficient

Sao Ta  FPT Digital

Very good diversification

The 3 months correlation between Sao and FPT is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Sao Ta Foods and FPT Digital Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FPT Digital Retail and Sao Ta 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 Sao Ta Foods are associated (or correlated) with FPT Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FPT Digital Retail has no effect on the direction of Sao Ta i.e., Sao Ta and FPT Digital go up and down completely randomly.

Pair Corralation between Sao Ta and FPT Digital

Assuming the 90 days trading horizon Sao Ta Foods is expected to generate 0.58 times more return on investment than FPT Digital. However, Sao Ta Foods is 1.73 times less risky than FPT Digital. It trades about -0.02 of its potential returns per unit of risk. FPT Digital Retail is currently generating about -0.08 per unit of risk. If you would invest  4,770,000  in Sao Ta Foods on December 26, 2024 and sell it today you would lose (65,000) from holding Sao Ta Foods or give up 1.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Sao Ta Foods  vs.  FPT Digital Retail

Sao Ta Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sao Ta Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Sao Ta is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

FPT Digital Retail

Risk-Adjusted Performance

Very Weak

Over the last 90 days FPT Digital Retail 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 Sao Ta and FPT Digital

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

The idea behind Sao Ta Foods and FPT Digital Retail 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 Transaction History module to view history of all your transactions and understand their impact on performance.