Correlation Between Ho Chi and Thanh Dat

Can any of the company-specific risk be diversified away by investing in both Ho Chi and Thanh Dat 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 Thanh Dat 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 Thanh Dat Investment, you can compare the effects of market volatilities on Ho Chi and Thanh Dat 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 Thanh Dat. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ho Chi and Thanh Dat.

Diversification Opportunities for Ho Chi and Thanh Dat

0.51

Correlation Coefficient

Ho Chi  Thanh Dat

Very weak diversification

The 3 months correlation between HDB and Thanh is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Ho Chi Minh and Thanh Dat Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thanh Dat Investment 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 Thanh Dat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thanh Dat Investment has no effect on the direction of Ho Chi i.e., Ho Chi and Thanh Dat go up and down completely randomly.

Pair Corralation between Ho Chi and Thanh Dat

Assuming the 90 days trading horizon Ho Chi Minh is expected to generate 1.09 times more return on investment than Thanh Dat. However, Ho Chi is 1.09 times more volatile than Thanh Dat Investment. It trades about 0.0 of its potential returns per unit of risk. Thanh Dat Investment is currently generating about -0.13 per unit of risk. If you would invest  2,340,000  in Ho Chi Minh on December 20, 2024 and sell it today you would lose (35,000) from holding Ho Chi Minh or give up 1.5% of portfolio value over 90 days.

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

Ho Chi Minh  vs.  Thanh Dat Investment

Ho Chi Minh

Risk-Adjusted Performance

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 very healthy fundamental drivers, Ho Chi is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Thanh Dat Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Thanh Dat Investment 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 indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Ho Chi and Thanh Dat

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

The idea behind Ho Chi Minh and Thanh Dat 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.

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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.