Correlation Between Din Capital and FPT Digital

Can any of the company-specific risk be diversified away by investing in both Din Capital and FPT Digital 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 Din Capital and FPT Digital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Din Capital Investment and FPT Digital Retail, you can compare the effects of market volatilities on Din Capital and FPT Digital 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 Din Capital with a short position of FPT Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Din Capital and FPT Digital.

Diversification Opportunities for Din Capital and FPT Digital

0.68

Correlation Coefficient

Din Capital  FPT Digital

Poor diversification

The 3 months correlation between Din and FPT is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Din Capital Investment and FPT Digital Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FPT Digital Retail and Din Capital 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 Din Capital Investment are associated (or correlated) with FPT Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FPT Digital Retail has no effect on the direction of Din Capital i.e., Din Capital and FPT Digital go up and down completely randomly.

Pair Corralation between Din Capital and FPT Digital

Assuming the 90 days trading horizon Din Capital is expected to generate 1.11 times less return on investment than FPT Digital. In addition to that, Din Capital is 1.42 times more volatile than FPT Digital Retail. It trades about 0.17 of its total potential returns per unit of risk. FPT Digital Retail is currently generating about 0.26 per unit of volatility. If you would invest  16,850,000  in FPT Digital Retail on October 25, 2024 and sell it today you would earn a total of  3,250,000  from holding FPT Digital Retail or generate 19.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.83%
Values	Daily Returns

Din Capital Investment  vs.  FPT Digital Retail

Din Capital Investment

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Din Capital Investment are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental drivers, Din Capital displayed solid returns over the last few months and may actually be approaching a breakup point.

FPT Digital Retail

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FPT Digital Retail are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, FPT Digital displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Din Capital and FPT Digital

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

The idea behind Din Capital Investment and FPT Digital Retail 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.