Correlation Between Hochiminh City and DIC Holdings

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

By analyzing existing cross correlation between Hochiminh City Metal and DIC Holdings Construction, you can compare the effects of market volatilities on Hochiminh City and DIC Holdings 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 Hochiminh City with a short position of DIC Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hochiminh City and DIC Holdings.

Diversification Opportunities for Hochiminh City and DIC Holdings

0.29

Correlation Coefficient

Hochiminh City  DIC Holdings

Modest diversification

The 3 months correlation between Hochiminh and DIC is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Hochiminh City Metal and DIC Holdings Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DIC Holdings Construction and Hochiminh City 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 Hochiminh City Metal are associated (or correlated) with DIC Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DIC Holdings Construction has no effect on the direction of Hochiminh City i.e., Hochiminh City and DIC Holdings go up and down completely randomly.

Pair Corralation between Hochiminh City and DIC Holdings

Assuming the 90 days trading horizon Hochiminh City is expected to generate 2.82 times less return on investment than DIC Holdings. But when comparing it to its historical volatility, Hochiminh City Metal is 2.74 times less risky than DIC Holdings. It trades about 0.11 of its potential returns per unit of risk. DIC Holdings Construction is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,100,000  in DIC Holdings Construction on September 15, 2024 and sell it today you would earn a total of  230,000  from holding DIC Holdings Construction or generate 20.91% return on investment over 90 days.

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

Hochiminh City Metal  vs.  DIC Holdings Construction

Hochiminh City Metal

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hochiminh City Metal are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Hochiminh City may actually be approaching a critical reversion point that can send shares even higher in January 2025.

DIC Holdings Construction

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DIC Holdings Construction are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, DIC Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hochiminh City and DIC Holdings

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

The idea behind Hochiminh City Metal and DIC Holdings Construction 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.