Correlation Between Ho Chi and CMC Investment

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

By analyzing existing cross correlation between Ho Chi Minh and CMC Investment JSC, you can compare the effects of market volatilities on Ho Chi and CMC Investment 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 Ho Chi with a short position of CMC Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ho Chi and CMC Investment.

Diversification Opportunities for Ho Chi and CMC Investment

-0.11

Correlation Coefficient

Ho Chi  CMC Investment

Good diversification

The 3 months correlation between HDB and CMC is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Ho Chi Minh and CMC Investment JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMC Investment JSC and Ho Chi 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 Ho Chi Minh are associated (or correlated) with CMC Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CMC Investment JSC has no effect on the direction of Ho Chi i.e., Ho Chi and CMC Investment go up and down completely randomly.

Pair Corralation between Ho Chi and CMC Investment

Assuming the 90 days trading horizon Ho Chi Minh is expected to under-perform the CMC Investment. But the stock apears to be less risky and, when comparing its historical volatility, Ho Chi Minh is 2.36 times less risky than CMC Investment. The stock trades about -0.05 of its potential returns per unit of risk. The CMC Investment JSC is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  620,000  in CMC Investment JSC on October 25, 2024 and sell it today you would lose (20,000) from holding CMC Investment JSC or give up 3.23% of portfolio value over 90 days.

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

Ho Chi Minh  vs.  CMC Investment JSC

Ho Chi Minh

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ho Chi Minh has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental drivers remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

CMC Investment JSC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CMC Investment JSC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, CMC Investment displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ho Chi and CMC Investment

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

The idea behind Ho Chi Minh and CMC Investment JSC 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.