Correlation Between Saigon Machinery and MST Investment

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

Diversification Opportunities for Saigon Machinery and MST Investment

0.6

Correlation Coefficient

Saigon Machinery  MST Investment

Poor diversification

The 3 months correlation between Saigon and MST is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Saigon Machinery Spare and MST Investment JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MST Investment JSC 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 MST Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MST Investment JSC has no effect on the direction of Saigon Machinery i.e., Saigon Machinery and MST Investment go up and down completely randomly.

Pair Corralation between Saigon Machinery and MST Investment

Assuming the 90 days trading horizon Saigon Machinery Spare is expected to generate 1.63 times more return on investment than MST Investment. However, Saigon Machinery is 1.63 times more volatile than MST Investment JSC. It trades about 0.93 of its potential returns per unit of risk. MST Investment JSC is currently generating about 0.12 per unit of risk. If you would invest  1,090,000  in Saigon Machinery Spare on October 8, 2024 and sell it today you would earn a total of  385,000  from holding Saigon Machinery Spare or generate 35.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	52.63%
Values	Daily Returns

Saigon Machinery Spare  vs.  MST Investment JSC

Saigon Machinery Spare

Risk-Adjusted Performance

40 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Saigon Machinery Spare are ranked lower than 40 (%) of all global equities and portfolios over the last 90 days. 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.

MST Investment JSC

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with Saigon Machinery and MST Investment

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

The idea behind Saigon Machinery Spare and MST Investment JSC 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.