Correlation Between Long Giang and Saigon Machinery

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

By analyzing existing cross correlation between Long Giang Investment and Saigon Machinery Spare, you can compare the effects of market volatilities on Long Giang and Saigon Machinery 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 Giang with a short position of Saigon Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Long Giang and Saigon Machinery.

Diversification Opportunities for Long Giang and Saigon Machinery

0.2

Correlation Coefficient

Long Giang  Saigon Machinery

Modest diversification

The 3 months correlation between Long and Saigon is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Long Giang Investment and Saigon Machinery Spare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saigon Machinery Spare and Long Giang 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 Giang Investment are associated (or correlated) with Saigon Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saigon Machinery Spare has no effect on the direction of Long Giang i.e., Long Giang and Saigon Machinery go up and down completely randomly.

Pair Corralation between Long Giang and Saigon Machinery

Assuming the 90 days trading horizon Long Giang is expected to generate 29.66 times less return on investment than Saigon Machinery. But when comparing it to its historical volatility, Long Giang Investment is 1.83 times less risky than Saigon Machinery. It trades about 0.06 of its potential returns per unit of risk. Saigon Machinery Spare is currently generating about 1.01 of returns per unit of risk over similar time horizon. If you would invest  1,075,000  in Saigon Machinery Spare on October 6, 2024 and sell it today you would earn a total of  400,000  from holding Saigon Machinery Spare or generate 37.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	47.62%
Values	Daily Returns

Long Giang Investment  vs.  Saigon Machinery Spare

Long Giang Investment

Risk-Adjusted Performance

0 of 100

Very Weak

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

Saigon Machinery Spare

Risk-Adjusted Performance

33 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Saigon Machinery Spare are ranked lower than 33 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Saigon Machinery displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Long Giang and Saigon Machinery

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

The idea behind Long Giang Investment and Saigon Machinery Spare 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.