Correlation Between Hochiminh City and SMC Investment

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

Diversification Opportunities for Hochiminh City and SMC Investment

0.4

Correlation Coefficient

Hochiminh City  SMC Investment

Very weak diversification

The 3 months correlation between Hochiminh and SMC is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Hochiminh City Metal and SMC Investment Trading in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMC Investment Trading 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 SMC Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMC Investment Trading has no effect on the direction of Hochiminh City i.e., Hochiminh City and SMC Investment go up and down completely randomly.

Pair Corralation between Hochiminh City and SMC Investment

Assuming the 90 days trading horizon Hochiminh City Metal is expected to generate 0.45 times more return on investment than SMC Investment. However, Hochiminh City Metal is 2.22 times less risky than SMC Investment. It trades about 0.0 of its potential returns per unit of risk. SMC Investment Trading is currently generating about -0.17 per unit of risk. If you would invest  1,168,074  in Hochiminh City Metal on September 27, 2024 and sell it today you would lose (23,074) from holding Hochiminh City Metal or give up 1.98% of portfolio value over 90 days.

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

Hochiminh City Metal  vs.  SMC Investment Trading

Hochiminh City Metal

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hochiminh City Metal are ranked lower than 5 (%) 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.

SMC Investment Trading

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days SMC Investment Trading has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, SMC Investment 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 SMC Investment

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

The idea behind Hochiminh City Metal and SMC Investment Trading 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.