Correlation Between Hochiminh City and Thong Nhat

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

Diversification Opportunities for Hochiminh City and Thong Nhat

0.32

Correlation Coefficient

Hochiminh City  Thong Nhat

Weak diversification

The 3 months correlation between Hochiminh and Thong is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Hochiminh City Metal and Thong Nhat Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thong Nhat 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 Thong Nhat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thong Nhat Rubber has no effect on the direction of Hochiminh City i.e., Hochiminh City and Thong Nhat go up and down completely randomly.

Pair Corralation between Hochiminh City and Thong Nhat

Assuming the 90 days trading horizon Hochiminh City Metal is expected to generate 0.36 times more return on investment than Thong Nhat. However, Hochiminh City Metal is 2.78 times less risky than Thong Nhat. It trades about -0.03 of its potential returns per unit of risk. Thong Nhat Rubber is currently generating about -0.04 per unit of risk. If you would invest  1,160,000  in Hochiminh City Metal on September 3, 2024 and sell it today you would lose (40,000) from holding Hochiminh City Metal or give up 3.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	62.5%
Values	Daily Returns

Hochiminh City Metal  vs.  Thong Nhat Rubber

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.

Thong Nhat Rubber

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thong Nhat 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 Thong Nhat

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

The idea behind Hochiminh City Metal and Thong Nhat 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..