Correlation Between Hochiminh City and Duc Thanh

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

Diversification Opportunities for Hochiminh City and Duc Thanh

-0.11

Correlation Coefficient

Hochiminh City  Duc Thanh

Good diversification

The 3 months correlation between Hochiminh and Duc is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Hochiminh City Metal and Duc Thanh Wood in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duc Thanh Wood 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 Duc Thanh. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duc Thanh Wood has no effect on the direction of Hochiminh City i.e., Hochiminh City and Duc Thanh go up and down completely randomly.

Pair Corralation between Hochiminh City and Duc Thanh

Assuming the 90 days trading horizon Hochiminh City Metal is expected to under-perform the Duc Thanh. But the stock apears to be less risky and, when comparing its historical volatility, Hochiminh City Metal is 1.24 times less risky than Duc Thanh. The stock trades about -0.01 of its potential returns per unit of risk. The Duc Thanh Wood is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,604,546  in Duc Thanh Wood on September 12, 2024 and sell it today you would earn a total of  70,454  from holding Duc Thanh Wood or generate 2.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Hochiminh City Metal  vs.  Duc Thanh Wood

Hochiminh City Metal

Risk-Adjusted Performance

0 of 100

Very Weak

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

Duc Thanh Wood

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Duc Thanh Wood are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Duc Thanh is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Hochiminh City and Duc Thanh

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

The idea behind Hochiminh City Metal and Duc Thanh Wood 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.