Correlation Between Hanoi Plastics and Southern Rubber

Can any of the company-specific risk be diversified away by investing in both Hanoi Plastics and Southern 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 Hanoi Plastics and Southern Rubber 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 Southern Rubber Industry, you can compare the effects of market volatilities on Hanoi Plastics and Southern 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 Hanoi Plastics with a short position of Southern Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanoi Plastics and Southern Rubber.

Diversification Opportunities for Hanoi Plastics and Southern Rubber

-0.69

Correlation Coefficient

Hanoi Plastics  Southern Rubber

Excellent diversification

The 3 months correlation between Hanoi and Southern is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Hanoi Plastics JSC and Southern Rubber Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Rubber Industry 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 Southern Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Rubber Industry has no effect on the direction of Hanoi Plastics i.e., Hanoi Plastics and Southern Rubber go up and down completely randomly.

Pair Corralation between Hanoi Plastics and Southern Rubber

Assuming the 90 days trading horizon Hanoi Plastics JSC is expected to under-perform the Southern Rubber. But the stock apears to be less risky and, when comparing its historical volatility, Hanoi Plastics JSC is 2.47 times less risky than Southern Rubber. The stock trades about -0.14 of its potential returns per unit of risk. The Southern Rubber Industry is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,150,000  in Southern Rubber Industry on October 23, 2024 and sell it today you would earn a total of  385,000  from holding Southern Rubber Industry or generate 33.48% return on investment over 90 days.

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

Hanoi Plastics JSC  vs.  Southern Rubber Industry

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.

Southern Rubber Industry

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Rubber Industry are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Southern Rubber displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hanoi Plastics and Southern Rubber

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

The idea behind Hanoi Plastics JSC and Southern Rubber Industry 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.