Correlation Between Long Giang and Viet Nam

Can any of the company-specific risk be diversified away by investing in both Long Giang and Viet Nam 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 Viet Nam 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 Viet Nam Construction, you can compare the effects of market volatilities on Long Giang and Viet Nam 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 Viet Nam. Check out your portfolio center. Please also check ongoing floating volatility patterns of Long Giang and Viet Nam.

Diversification Opportunities for Long Giang and Viet Nam

-0.11

Correlation Coefficient

Long Giang  Viet Nam

Good diversification

The 3 months correlation between Long and Viet is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Long Giang Investment and Viet Nam Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viet Nam Construction 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 Viet Nam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viet Nam Construction has no effect on the direction of Long Giang i.e., Long Giang and Viet Nam go up and down completely randomly.

Pair Corralation between Long Giang and Viet Nam

Assuming the 90 days trading horizon Long Giang Investment is expected to generate 0.95 times more return on investment than Viet Nam. However, Long Giang Investment is 1.05 times less risky than Viet Nam. It trades about 0.02 of its potential returns per unit of risk. Viet Nam Construction is currently generating about -0.11 per unit of risk. If you would invest  249,000  in Long Giang Investment on October 11, 2024 and sell it today you would earn a total of  1,000.00  from holding Long Giang Investment or generate 0.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	66.67%
Values	Daily Returns

Long Giang Investment  vs.  Viet Nam Construction

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.

Viet Nam Construction

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Viet Nam Construction are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Viet Nam displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Long Giang and Viet Nam

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

The idea behind Long Giang Investment and Viet Nam Construction 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.