Correlation Between Saigon Beer and Vietnam Dairy

Can any of the company-specific risk be diversified away by investing in both Saigon Beer and Vietnam Dairy 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 Saigon Beer and Vietnam Dairy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Saigon Beer Alcohol and Vietnam Dairy Products, you can compare the effects of market volatilities on Saigon Beer and Vietnam Dairy 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 Saigon Beer with a short position of Vietnam Dairy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Saigon Beer and Vietnam Dairy.

Diversification Opportunities for Saigon Beer and Vietnam Dairy

0.55

Correlation Coefficient

Saigon Beer  Vietnam Dairy

Very weak diversification

The 3 months correlation between Saigon and Vietnam is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Saigon Beer Alcohol and Vietnam Dairy Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vietnam Dairy Products and Saigon Beer 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 Saigon Beer Alcohol are associated (or correlated) with Vietnam Dairy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vietnam Dairy Products has no effect on the direction of Saigon Beer i.e., Saigon Beer and Vietnam Dairy go up and down completely randomly.

Pair Corralation between Saigon Beer and Vietnam Dairy

Assuming the 90 days trading horizon Saigon Beer Alcohol is expected to under-perform the Vietnam Dairy. But the stock apears to be less risky and, when comparing its historical volatility, Saigon Beer Alcohol is 1.22 times less risky than Vietnam Dairy. The stock trades about -0.2 of its potential returns per unit of risk. The Vietnam Dairy Products is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  6,389,922  in Vietnam Dairy Products on December 23, 2024 and sell it today you would lose (209,922) from holding Vietnam Dairy Products or give up 3.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Saigon Beer Alcohol  vs.  Vietnam Dairy Products

Saigon Beer Alcohol

Risk-Adjusted Performance

Very Weak

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

Vietnam Dairy Products

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Saigon Beer and Vietnam Dairy

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

The idea behind Saigon Beer Alcohol and Vietnam Dairy Products 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.

Check out your portfolio center.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.