Correlation Between Hanoi Plastics and Binh Minh

Can any of the company-specific risk be diversified away by investing in both Hanoi Plastics and Binh Minh 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 Hanoi Plastics and Binh Minh into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hanoi Plastics JSC and Binh Minh Plastics, you can compare the effects of market volatilities on Hanoi Plastics and Binh Minh 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 Hanoi Plastics with a short position of Binh Minh. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanoi Plastics and Binh Minh.

Diversification Opportunities for Hanoi Plastics and Binh Minh

0.51

Correlation Coefficient

Hanoi Plastics  Binh Minh

Very weak diversification

The 3 months correlation between Hanoi and Binh is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Hanoi Plastics JSC and Binh Minh Plastics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Binh Minh Plastics and Hanoi Plastics 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 Hanoi Plastics JSC are associated (or correlated) with Binh Minh. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Binh Minh Plastics has no effect on the direction of Hanoi Plastics i.e., Hanoi Plastics and Binh Minh go up and down completely randomly.

Pair Corralation between Hanoi Plastics and Binh Minh

Assuming the 90 days trading horizon Hanoi Plastics JSC is expected to under-perform the Binh Minh. But the stock apears to be less risky and, when comparing its historical volatility, Hanoi Plastics JSC is 1.84 times less risky than Binh Minh. The stock trades about -0.14 of its potential returns per unit of risk. The Binh Minh Plastics is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  13,350,000  in Binh Minh Plastics on October 23, 2024 and sell it today you would lose (850,000) from holding Binh Minh Plastics or give up 6.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Hanoi Plastics JSC  vs.  Binh Minh Plastics

Hanoi Plastics JSC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hanoi Plastics JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Binh Minh Plastics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Hanoi Plastics and Binh Minh

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

The idea behind Hanoi Plastics JSC and Binh Minh Plastics 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.