Correlation Between Sao Ta and Van Dien

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

Diversification Opportunities for Sao Ta and Van Dien

0.5

Correlation Coefficient

Sao Ta  Van Dien

Very weak diversification

The 3 months correlation between Sao and Van is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Sao Ta Foods and Van Dien Fused in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Van Dien Fused 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 Van Dien. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Van Dien Fused has no effect on the direction of Sao Ta i.e., Sao Ta and Van Dien go up and down completely randomly.

Pair Corralation between Sao Ta and Van Dien

Assuming the 90 days trading horizon Sao Ta is expected to generate 22.74 times less return on investment than Van Dien. But when comparing it to its historical volatility, Sao Ta Foods is 4.89 times less risky than Van Dien. It trades about 0.06 of its potential returns per unit of risk. Van Dien Fused is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  1,315,000  in Van Dien Fused on December 19, 2024 and sell it today you would earn a total of  640,000  from holding Van Dien Fused or generate 48.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	63.79%
Values	Daily Returns

Sao Ta Foods  vs.  Van Dien Fused

Sao Ta Foods

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sao Ta Foods are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Sao Ta is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Van Dien Fused

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Van Dien Fused are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Van Dien displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sao Ta and Van Dien

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

The idea behind Sao Ta Foods and Van Dien Fused 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.