Correlation Between Hochiminh City and Japan Vietnam

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

Diversification Opportunities for Hochiminh City and Japan Vietnam

0.72

Correlation Coefficient

Hochiminh City  Japan Vietnam

Poor diversification

The 3 months correlation between Hochiminh and Japan is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Hochiminh City Metal and Japan Vietnam Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Vietnam Medical 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 Japan Vietnam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Vietnam Medical has no effect on the direction of Hochiminh City i.e., Hochiminh City and Japan Vietnam go up and down completely randomly.

Pair Corralation between Hochiminh City and Japan Vietnam

Assuming the 90 days trading horizon Hochiminh City is expected to generate 2.9 times less return on investment than Japan Vietnam. In addition to that, Hochiminh City is 1.15 times more volatile than Japan Vietnam Medical. It trades about 0.04 of its total potential returns per unit of risk. Japan Vietnam Medical is currently generating about 0.15 per unit of volatility. If you would invest  330,000  in Japan Vietnam Medical on October 9, 2024 and sell it today you would earn a total of  54,000  from holding Japan Vietnam Medical or generate 16.36% return on investment over 90 days.

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

Hochiminh City Metal  vs.  Japan Vietnam Medical

Hochiminh City Metal

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hochiminh City Metal are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Japan Vietnam Medical

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Vietnam Medical are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Japan Vietnam displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hochiminh City and Japan Vietnam

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

The idea behind Hochiminh City Metal and Japan Vietnam Medical 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.