Correlation Between Hochiminh City and Sao Vang

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

Diversification Opportunities for Hochiminh City and Sao Vang

-0.38

Correlation Coefficient

Hochiminh City  Sao Vang

Very good diversification

The 3 months correlation between Hochiminh and Sao is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Hochiminh City Metal and Sao Vang Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sao Vang Rubber 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 Sao Vang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sao Vang Rubber has no effect on the direction of Hochiminh City i.e., Hochiminh City and Sao Vang go up and down completely randomly.

Pair Corralation between Hochiminh City and Sao Vang

Assuming the 90 days trading horizon Hochiminh City Metal is expected to generate 0.53 times more return on investment than Sao Vang. However, Hochiminh City Metal is 1.9 times less risky than Sao Vang. It trades about 0.04 of its potential returns per unit of risk. Sao Vang Rubber is currently generating about -0.05 per unit of risk. If you would invest  1,130,000  in Hochiminh City Metal on October 8, 2024 and sell it today you would earn a total of  50,000  from holding Hochiminh City Metal or generate 4.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	73.44%
Values	Daily Returns

Hochiminh City Metal  vs.  Sao Vang Rubber

Hochiminh City Metal

Risk-Adjusted Performance

3 of 100

OK

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.

Sao Vang Rubber

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sao Vang Rubber has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Hochiminh City and Sao Vang

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

The idea behind Hochiminh City Metal and Sao Vang Rubber 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.