Correlation Between Saigon Machinery and Truong Thanh

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

Diversification Opportunities for Saigon Machinery and Truong Thanh

0.41

Correlation Coefficient

Saigon Machinery  Truong Thanh

Very weak diversification

The 3 months correlation between Saigon and Truong is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Saigon Machinery Spare and Truong Thanh Furniture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Truong Thanh Furniture 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 Truong Thanh. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Truong Thanh Furniture has no effect on the direction of Saigon Machinery i.e., Saigon Machinery and Truong Thanh go up and down completely randomly.

Pair Corralation between Saigon Machinery and Truong Thanh

Assuming the 90 days trading horizon Saigon Machinery Spare is expected to under-perform the Truong Thanh. In addition to that, Saigon Machinery is 4.0 times more volatile than Truong Thanh Furniture. It trades about -0.01 of its total potential returns per unit of risk. Truong Thanh Furniture is currently generating about 0.03 per unit of volatility. If you would invest  305,000  in Truong Thanh Furniture on December 22, 2024 and sell it today you would earn a total of  5,000  from holding Truong Thanh Furniture or generate 1.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	42.37%
Values	Daily Returns

Saigon Machinery Spare  vs.  Truong Thanh Furniture

Saigon Machinery Spare

Risk-Adjusted Performance

Very Weak

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 healthy basic indicators, Saigon Machinery is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Truong Thanh Furniture

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Truong Thanh Furniture are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Truong Thanh 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 Truong Thanh

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

The idea behind Saigon Machinery Spare and Truong Thanh Furniture 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.