Correlation Between Hanoi Plastics and Tien Phong

Can any of the company-specific risk be diversified away by investing in both Hanoi Plastics and Tien Phong 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 Tien Phong 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 Tien Phong Plastic, you can compare the effects of market volatilities on Hanoi Plastics and Tien Phong 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 Tien Phong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanoi Plastics and Tien Phong.

Diversification Opportunities for Hanoi Plastics and Tien Phong

0.66

Correlation Coefficient

Hanoi Plastics  Tien Phong

Poor diversification

The 3 months correlation between Hanoi and Tien is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Hanoi Plastics JSC and Tien Phong Plastic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tien Phong Plastic 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 Tien Phong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tien Phong Plastic has no effect on the direction of Hanoi Plastics i.e., Hanoi Plastics and Tien Phong go up and down completely randomly.

Pair Corralation between Hanoi Plastics and Tien Phong

Assuming the 90 days trading horizon Hanoi Plastics JSC is expected to generate 0.8 times more return on investment than Tien Phong. However, Hanoi Plastics JSC is 1.24 times less risky than Tien Phong. It trades about 0.03 of its potential returns per unit of risk. Tien Phong Plastic is currently generating about 0.01 per unit of risk. If you would invest  1,335,000  in Hanoi Plastics JSC on December 21, 2024 and sell it today you would earn a total of  30,000  from holding Hanoi Plastics JSC or generate 2.25% return on investment over 90 days.

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

Hanoi Plastics JSC  vs.  Tien Phong Plastic

Hanoi Plastics JSC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hanoi Plastics JSC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical indicators, Hanoi Plastics is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Tien Phong Plastic

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tien Phong Plastic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Tien Phong 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 Tien Phong

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

The idea behind Hanoi Plastics JSC and Tien Phong Plastic 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.