Correlation Between Hanoi Beer and Vu Dang

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

By analyzing existing cross correlation between Hanoi Beer Trading and Vu Dang Investment, you can compare the effects of market volatilities on Hanoi Beer and Vu Dang 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 Hanoi Beer with a short position of Vu Dang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanoi Beer and Vu Dang.

Diversification Opportunities for Hanoi Beer and Vu Dang

0.17

Correlation Coefficient

Hanoi Beer  Vu Dang

Average diversification

The 3 months correlation between Hanoi and SVD is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Hanoi Beer Trading and Vu Dang Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vu Dang Investment and Hanoi Beer 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 Hanoi Beer Trading are associated (or correlated) with Vu Dang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vu Dang Investment has no effect on the direction of Hanoi Beer i.e., Hanoi Beer and Vu Dang go up and down completely randomly.

Pair Corralation between Hanoi Beer and Vu Dang

Assuming the 90 days trading horizon Hanoi Beer Trading is expected to under-perform the Vu Dang. But the stock apears to be less risky and, when comparing its historical volatility, Hanoi Beer Trading is 1.16 times less risky than Vu Dang. The stock trades about -0.04 of its potential returns per unit of risk. The Vu Dang Investment is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  283,000  in Vu Dang Investment on September 12, 2024 and sell it today you would earn a total of  67,000  from holding Vu Dang Investment or generate 23.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	46.88%
Values	Daily Returns

Hanoi Beer Trading  vs.  Vu Dang Investment

Hanoi Beer Trading

Risk-Adjusted Performance

0 of 100

Very Weak

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

Vu Dang Investment

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vu Dang Investment are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Vu Dang displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hanoi Beer and Vu Dang

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

The idea behind Hanoi Beer Trading and Vu Dang Investment 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.