Correlation Between Saigon Machinery and Japan Vietnam

Can any of the company-specific risk be diversified away by investing in both Saigon Machinery and Japan Vietnam 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 Japan Vietnam 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 Japan Vietnam Medical, you can compare the effects of market volatilities on Saigon Machinery and Japan Vietnam 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 Japan Vietnam. Check out your portfolio center. Please also check ongoing floating volatility patterns of Saigon Machinery and Japan Vietnam.

Diversification Opportunities for Saigon Machinery and Japan Vietnam

0.52

Correlation Coefficient

Saigon Machinery  Japan Vietnam

Very weak diversification

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

Pair Corralation between Saigon Machinery and Japan Vietnam

Assuming the 90 days trading horizon Saigon Machinery Spare is expected to generate 1.98 times more return on investment than Japan Vietnam. However, Saigon Machinery is 1.98 times more volatile than Japan Vietnam Medical. It trades about 0.65 of its potential returns per unit of risk. Japan Vietnam Medical is currently generating about 0.14 per unit of risk. If you would invest  977,120  in Saigon Machinery Spare on October 25, 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 Together
Strength	Weak
Accuracy	31.75%
Values	Daily Returns

Saigon Machinery Spare  vs.  Japan Vietnam Medical

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.

Japan Vietnam Medical

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Vietnam Medical are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Japan Vietnam displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Saigon Machinery and Japan Vietnam

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

The idea behind Saigon Machinery Spare and Japan Vietnam Medical 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.