Correlation Between Long An and Vietnam Rubber

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

By analyzing existing cross correlation between Long An Food and Vietnam Rubber Group, you can compare the effects of market volatilities on Long An and Vietnam Rubber 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 Long An with a short position of Vietnam Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Long An and Vietnam Rubber.

Diversification Opportunities for Long An and Vietnam Rubber

-0.67

Correlation Coefficient

Long An  Vietnam Rubber

Excellent diversification

The 3 months correlation between Long and Vietnam is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Long An Food and Vietnam Rubber Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vietnam Rubber Group and Long An 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 Long An Food are associated (or correlated) with Vietnam Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vietnam Rubber Group has no effect on the direction of Long An i.e., Long An and Vietnam Rubber go up and down completely randomly.

Pair Corralation between Long An and Vietnam Rubber

Assuming the 90 days trading horizon Long An Food is expected to generate 0.93 times more return on investment than Vietnam Rubber. However, Long An Food is 1.08 times less risky than Vietnam Rubber. It trades about 0.02 of its potential returns per unit of risk. Vietnam Rubber Group is currently generating about -0.09 per unit of risk. If you would invest  1,745,000  in Long An Food on September 15, 2024 and sell it today you would earn a total of  15,000  from holding Long An Food or generate 0.86% return on investment over 90 days.

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

Long An Food  vs.  Vietnam Rubber Group

Long An Food

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Long An Food are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Long An is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Vietnam Rubber Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vietnam Rubber Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic 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 Long An and Vietnam Rubber

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

The idea behind Long An Food and Vietnam Rubber 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.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.