Correlation Between Vietnam Airlines and Dinhvu Port

Can any of the company-specific risk be diversified away by investing in both Vietnam Airlines and Dinhvu Port 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 Vietnam Airlines and Dinhvu Port into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vietnam Airlines JSC and Dinhvu Port Investment, you can compare the effects of market volatilities on Vietnam Airlines and Dinhvu Port 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 Vietnam Airlines with a short position of Dinhvu Port. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vietnam Airlines and Dinhvu Port.

Diversification Opportunities for Vietnam Airlines and Dinhvu Port

0.75

Correlation Coefficient

Vietnam Airlines  Dinhvu Port

Poor diversification

The 3 months correlation between Vietnam and Dinhvu is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Vietnam Airlines JSC and Dinhvu Port Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dinhvu Port Investment and Vietnam Airlines 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 Vietnam Airlines JSC are associated (or correlated) with Dinhvu Port. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dinhvu Port Investment has no effect on the direction of Vietnam Airlines i.e., Vietnam Airlines and Dinhvu Port go up and down completely randomly.

Pair Corralation between Vietnam Airlines and Dinhvu Port

Assuming the 90 days trading horizon Vietnam Airlines JSC is expected to generate 2.67 times more return on investment than Dinhvu Port. However, Vietnam Airlines is 2.67 times more volatile than Dinhvu Port Investment. It trades about 0.23 of its potential returns per unit of risk. Dinhvu Port Investment is currently generating about 0.16 per unit of risk. If you would invest  2,035,000  in Vietnam Airlines JSC on October 7, 2024 and sell it today you would earn a total of  885,000  from holding Vietnam Airlines JSC or generate 43.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Vietnam Airlines JSC  vs.  Dinhvu Port Investment

Vietnam Airlines JSC

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vietnam Airlines JSC are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Vietnam Airlines displayed solid returns over the last few months and may actually be approaching a breakup point.

Dinhvu Port Investment

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dinhvu Port Investment are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Dinhvu Port may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Vietnam Airlines and Dinhvu Port

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

The idea behind Vietnam Airlines JSC and Dinhvu Port Investment 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.