Correlation Between Hochiminh City and Van Dien

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

Diversification Opportunities for Hochiminh City and Van Dien

-0.02

Correlation Coefficient

Hochiminh City  Van Dien

Good diversification

The 3 months correlation between Hochiminh and Van is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Hochiminh City Metal and Van Dien Fused in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Van Dien Fused 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 Van Dien. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Van Dien Fused has no effect on the direction of Hochiminh City i.e., Hochiminh City and Van Dien go up and down completely randomly.

Pair Corralation between Hochiminh City and Van Dien

Assuming the 90 days trading horizon Hochiminh City Metal is expected to generate 0.43 times more return on investment than Van Dien. However, Hochiminh City Metal is 2.34 times less risky than Van Dien. It trades about 0.04 of its potential returns per unit of risk. Van Dien Fused is currently generating about 0.01 per unit of risk. If you would invest  1,090,000  in Hochiminh City Metal on October 24, 2024 and sell it today you would earn a total of  60,000  from holding Hochiminh City Metal or generate 5.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	55.29%
Values	Daily Returns

Hochiminh City Metal  vs.  Van Dien Fused

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.

Van Dien Fused

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Van Dien Fused has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Van Dien 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 Van Dien

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

The idea behind Hochiminh City Metal and Van Dien Fused 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.