Correlation Between IDJ FINANCIAL and Sao Mai

Can any of the company-specific risk be diversified away by investing in both IDJ FINANCIAL and Sao Mai 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 IDJ FINANCIAL and Sao Mai into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between IDJ FINANCIAL and Sao Mai Group, you can compare the effects of market volatilities on IDJ FINANCIAL and Sao Mai 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 IDJ FINANCIAL with a short position of Sao Mai. Check out your portfolio center. Please also check ongoing floating volatility patterns of IDJ FINANCIAL and Sao Mai.

Diversification Opportunities for IDJ FINANCIAL and Sao Mai

0.88

Correlation Coefficient

IDJ FINANCIAL  Sao Mai

Very poor diversification

The 3 months correlation between IDJ and Sao is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding IDJ FINANCIAL and Sao Mai Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sao Mai Group and IDJ FINANCIAL 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 IDJ FINANCIAL are associated (or correlated) with Sao Mai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sao Mai Group has no effect on the direction of IDJ FINANCIAL i.e., IDJ FINANCIAL and Sao Mai go up and down completely randomly.

Pair Corralation between IDJ FINANCIAL and Sao Mai

Assuming the 90 days trading horizon IDJ FINANCIAL is expected to under-perform the Sao Mai. In addition to that, IDJ FINANCIAL is 1.5 times more volatile than Sao Mai Group. It trades about -0.13 of its total potential returns per unit of risk. Sao Mai Group is currently generating about -0.09 per unit of volatility. If you would invest  861,000  in Sao Mai Group on December 19, 2024 and sell it today you would lose (47,000) from holding Sao Mai Group or give up 5.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.31%
Values	Daily Returns

IDJ FINANCIAL  vs.  Sao Mai Group

IDJ FINANCIAL

Risk-Adjusted Performance

Very Weak

Over the last 90 days IDJ FINANCIAL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's forward-looking indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Sao Mai Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sao Mai Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Sao Mai is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IDJ FINANCIAL and Sao Mai

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

The idea behind IDJ FINANCIAL and Sao Mai Group 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 Transaction History module to view history of all your transactions and understand their impact on performance.