Correlation Between SMC Investment and Vietnam Airlines

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

By analyzing existing cross correlation between SMC Investment Trading and Vietnam Airlines JSC, you can compare the effects of market volatilities on SMC Investment and Vietnam Airlines 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 SMC Investment with a short position of Vietnam Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMC Investment and Vietnam Airlines.

Diversification Opportunities for SMC Investment and Vietnam Airlines

0.49

Correlation Coefficient

SMC Investment  Vietnam Airlines

Very weak diversification

The 3 months correlation between SMC and Vietnam is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding SMC Investment Trading and Vietnam Airlines JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vietnam Airlines JSC and SMC Investment 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 SMC Investment Trading are associated (or correlated) with Vietnam Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vietnam Airlines JSC has no effect on the direction of SMC Investment i.e., SMC Investment and Vietnam Airlines go up and down completely randomly.

Pair Corralation between SMC Investment and Vietnam Airlines

Assuming the 90 days trading horizon SMC Investment Trading is expected to under-perform the Vietnam Airlines. In addition to that, SMC Investment is 1.03 times more volatile than Vietnam Airlines JSC. It trades about -0.01 of its total potential returns per unit of risk. Vietnam Airlines JSC is currently generating about 0.06 per unit of volatility. If you would invest  1,425,000  in Vietnam Airlines JSC on October 11, 2024 and sell it today you would earn a total of  1,355,000  from holding Vietnam Airlines JSC or generate 95.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

SMC Investment Trading  vs.  Vietnam Airlines JSC

SMC Investment Trading

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SMC Investment Trading are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, SMC Investment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Vietnam Airlines JSC

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vietnam Airlines JSC are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Vietnam Airlines displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SMC Investment and Vietnam Airlines

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

The idea behind SMC Investment Trading and Vietnam Airlines 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.

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 Money Managers module to screen money managers from public funds and ETFs managed around the world.