Correlation Between Vietnam Rubber and POT

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

By analyzing existing cross correlation between Vietnam Rubber Group and PostTelecommunication Equipment, you can compare the effects of market volatilities on Vietnam Rubber and POT 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 Vietnam Rubber with a short position of POT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vietnam Rubber and POT.

Diversification Opportunities for Vietnam Rubber and POT

0.72

Correlation Coefficient

Vietnam Rubber  POT

Poor diversification

The 3 months correlation between Vietnam and POT is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Vietnam Rubber Group and PostTelecommunication Equipmen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PostTelecommunication and Vietnam Rubber 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 Vietnam Rubber Group are associated (or correlated) with POT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PostTelecommunication has no effect on the direction of Vietnam Rubber i.e., Vietnam Rubber and POT go up and down completely randomly.

Pair Corralation between Vietnam Rubber and POT

Assuming the 90 days trading horizon Vietnam Rubber is expected to generate 1.25 times less return on investment than POT. But when comparing it to its historical volatility, Vietnam Rubber Group is 4.04 times less risky than POT. It trades about 0.44 of its potential returns per unit of risk. PostTelecommunication Equipment is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,550,000  in PostTelecommunication Equipment on December 4, 2024 and sell it today you would earn a total of  180,000  from holding PostTelecommunication Equipment or generate 11.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	85.71%
Values	Daily Returns

Vietnam Rubber Group  vs.  PostTelecommunication Equipmen

Vietnam Rubber Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vietnam Rubber Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Vietnam Rubber may actually be approaching a critical reversion point that can send shares even higher in April 2025.

PostTelecommunication

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PostTelecommunication Equipment are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, POT may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Vietnam Rubber and POT

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

The idea behind Vietnam Rubber Group and PostTelecommunication Equipment 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.