Correlation Between Hai An and Dong Nai

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

By analyzing existing cross correlation between Hai An Transport and Dong Nai Plastic, you can compare the effects of market volatilities on Hai An and Dong Nai 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 Hai An with a short position of Dong Nai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hai An and Dong Nai.

Diversification Opportunities for Hai An and Dong Nai

-0.14

Correlation Coefficient

Hai An  Dong Nai

Good diversification

The 3 months correlation between Hai and Dong is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Hai An Transport and Dong Nai Plastic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dong Nai Plastic and Hai An 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 Hai An Transport are associated (or correlated) with Dong Nai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dong Nai Plastic has no effect on the direction of Hai An i.e., Hai An and Dong Nai go up and down completely randomly.

Pair Corralation between Hai An and Dong Nai

Assuming the 90 days trading horizon Hai An Transport is expected to generate 0.64 times more return on investment than Dong Nai. However, Hai An Transport is 1.55 times less risky than Dong Nai. It trades about 0.08 of its potential returns per unit of risk. Dong Nai Plastic is currently generating about -0.02 per unit of risk. If you would invest  4,915,000  in Hai An Transport on December 28, 2024 and sell it today you would earn a total of  335,000  from holding Hai An Transport or generate 6.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	77.59%
Values	Daily Returns

Hai An Transport  vs.  Dong Nai Plastic

Hai An Transport

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hai An Transport are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical indicators, Hai An may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Dong Nai Plastic

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Hai An and Dong Nai

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

The idea behind Hai An Transport and Dong Nai Plastic 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.