Correlation Between Hochiminh City and Ha Noi

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Can any of the company-specific risk be diversified away by investing in both Hochiminh City and Ha Noi 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 Ha Noi 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 Ha Noi Education, you can compare the effects of market volatilities on Hochiminh City and Ha Noi 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 Ha Noi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hochiminh City and Ha Noi.

Diversification Opportunities for Hochiminh City and Ha Noi

HochiminhEIDDiversified AwayHochiminhEIDDiversified Away100%
-0.46
  Correlation Coefficient

Very good diversification

The 3 months correlation between Hochiminh and EID is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Hochiminh City Metal and Ha Noi Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ha Noi Education 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 Ha Noi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ha Noi Education has no effect on the direction of Hochiminh City i.e., Hochiminh City and Ha Noi go up and down completely randomly.

Pair Corralation between Hochiminh City and Ha Noi

Assuming the 90 days trading horizon Hochiminh City Metal is expected to generate 2.2 times more return on investment than Ha Noi. However, Hochiminh City is 2.2 times more volatile than Ha Noi Education. It trades about 0.2 of its potential returns per unit of risk. Ha Noi Education is currently generating about -0.1 per unit of risk. If you would invest  1,130,000  in Hochiminh City Metal on October 4, 2024 and sell it today you would earn a total of  230,000  from holding Hochiminh City Metal or generate 20.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy92.19%
ValuesDaily Returns

Hochiminh City Metal  vs.  Ha Noi Education

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -6-4-2024
JavaScript chart by amCharts 3.21.15HMC EID
       Timeline  
Hochiminh City Metal 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Hochiminh City Metal are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Hochiminh City displayed solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15NovDecDecJan10,50011,00011,50012,00012,50013,00013,500
Ha Noi Education 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Ha Noi Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Ha Noi is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15NovDecDecJan26,00026,50027,00027,50028,000

Hochiminh City and Ha Noi Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.57-3.42-2.27-1.130.01.272.533.85.07 0.20.40.60.8
JavaScript chart by amCharts 3.21.15HMC EID
       Returns  

Pair Trading with Hochiminh City and Ha Noi

The main advantage of trading using opposite Hochiminh City and Ha Noi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hochiminh City position performs unexpectedly, Ha Noi 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 Ha Noi will offset losses from the drop in Ha Noi's long position.
The idea behind Hochiminh City Metal and Ha Noi Education 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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