Correlation Between Saigon Machinery and HUD1 Investment

Can any of the company-specific risk be diversified away by investing in both Saigon Machinery and HUD1 Investment 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 Machinery and HUD1 Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Saigon Machinery Spare and HUD1 Investment and, you can compare the effects of market volatilities on Saigon Machinery and HUD1 Investment 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 Machinery with a short position of HUD1 Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Saigon Machinery and HUD1 Investment.

Diversification Opportunities for Saigon Machinery and HUD1 Investment

-0.36

Correlation Coefficient

Saigon Machinery  HUD1 Investment

Very good diversification

The 3 months correlation between Saigon and HUD1 is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Saigon Machinery Spare and HUD1 Investment and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUD1 Investment and Saigon Machinery 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 Machinery Spare are associated (or correlated) with HUD1 Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUD1 Investment has no effect on the direction of Saigon Machinery i.e., Saigon Machinery and HUD1 Investment go up and down completely randomly.

Pair Corralation between Saigon Machinery and HUD1 Investment

Assuming the 90 days trading horizon Saigon Machinery Spare is expected to generate 0.8 times more return on investment than HUD1 Investment. However, Saigon Machinery Spare is 1.25 times less risky than HUD1 Investment. It trades about 0.63 of its potential returns per unit of risk. HUD1 Investment and is currently generating about 0.0 per unit of risk. If you would invest  977,120  in Saigon Machinery Spare on October 26, 2024 and sell it today you would earn a total of  622,880  from holding Saigon Machinery Spare or generate 63.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	55.26%
Values	Daily Returns

Saigon Machinery Spare  vs.  HUD1 Investment and

Saigon Machinery Spare

Risk-Adjusted Performance

0 of 100

Excellent

Over the last 90 days Saigon Machinery Spare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very unfluctuating basic indicators, Saigon Machinery displayed solid returns over the last few months and may actually be approaching a breakup point.

HUD1 Investment

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days HUD1 Investment and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, HUD1 Investment 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 Machinery and HUD1 Investment

The main advantage of trading using opposite Saigon Machinery and HUD1 Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Saigon Machinery position performs unexpectedly, HUD1 Investment 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 HUD1 Investment will offset losses from the drop in HUD1 Investment's long position.

The idea behind Saigon Machinery Spare and HUD1 Investment and 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.