Correlation Between Sao Ta and Vietnam Rubber

Can any of the company-specific risk be diversified away by investing in both Sao Ta and Vietnam Rubber 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 Vietnam Rubber 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 Vietnam Rubber Group, you can compare the effects of market volatilities on Sao Ta and Vietnam Rubber 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 Vietnam Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sao Ta and Vietnam Rubber.

Diversification Opportunities for Sao Ta and Vietnam Rubber

0.13

Correlation Coefficient

Sao Ta  Vietnam Rubber

Average diversification

The 3 months correlation between Sao and Vietnam is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Sao Ta Foods and Vietnam Rubber Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vietnam Rubber Group 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 Vietnam Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vietnam Rubber Group has no effect on the direction of Sao Ta i.e., Sao Ta and Vietnam Rubber go up and down completely randomly.

Pair Corralation between Sao Ta and Vietnam Rubber

Assuming the 90 days trading horizon Sao Ta is expected to generate 1.95 times less return on investment than Vietnam Rubber. But when comparing it to its historical volatility, Sao Ta Foods is 1.74 times less risky than Vietnam Rubber. It trades about 0.07 of its potential returns per unit of risk. Vietnam Rubber Group is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,342,740  in Vietnam Rubber Group on September 20, 2024 and sell it today you would earn a total of  1,792,260  from holding Vietnam Rubber Group or generate 133.48% return on investment over 90 days.

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

Sao Ta Foods  vs.  Vietnam Rubber Group

Sao Ta Foods

Risk-Adjusted Performance

0 of 100

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.

Vietnam Rubber Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vietnam Rubber Group 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 Vietnam Rubber

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

The idea behind Sao Ta Foods and Vietnam Rubber Group 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.