Correlation Between RangDong Plastic and Thong Nhat

Can any of the company-specific risk be diversified away by investing in both RangDong Plastic and Thong Nhat 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 RangDong Plastic and Thong Nhat into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between RangDong Plastic JSC and Thong Nhat Rubber, you can compare the effects of market volatilities on RangDong Plastic and Thong Nhat 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 RangDong Plastic with a short position of Thong Nhat. Check out your portfolio center. Please also check ongoing floating volatility patterns of RangDong Plastic and Thong Nhat.

Diversification Opportunities for RangDong Plastic and Thong Nhat

0.52

Correlation Coefficient

RangDong Plastic  Thong Nhat

Very weak diversification

The 3 months correlation between RangDong and Thong is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding RangDong Plastic JSC and Thong Nhat Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thong Nhat Rubber and RangDong Plastic 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 RangDong Plastic JSC are associated (or correlated) with Thong Nhat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thong Nhat Rubber has no effect on the direction of RangDong Plastic i.e., RangDong Plastic and Thong Nhat go up and down completely randomly.

Pair Corralation between RangDong Plastic and Thong Nhat

Assuming the 90 days trading horizon RangDong Plastic JSC is expected to under-perform the Thong Nhat. But the stock apears to be less risky and, when comparing its historical volatility, RangDong Plastic JSC is 1.33 times less risky than Thong Nhat. The stock trades about -0.32 of its potential returns per unit of risk. The Thong Nhat Rubber is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  3,850,000  in Thong Nhat Rubber on September 3, 2024 and sell it today you would lose (380,000) from holding Thong Nhat Rubber or give up 9.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	64.52%
Values	Daily Returns

RangDong Plastic JSC  vs.  Thong Nhat Rubber

RangDong Plastic JSC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RangDong Plastic JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Thong Nhat Rubber

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with RangDong Plastic and Thong Nhat

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

The idea behind RangDong Plastic JSC and Thong Nhat Rubber 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.