Correlation Between South Books and Da Nang

Can any of the company-specific risk be diversified away by investing in both South Books and Da Nang 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 South Books and Da Nang into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between South Books Educational and Da Nang Construction, you can compare the effects of market volatilities on South Books and Da Nang 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 South Books with a short position of Da Nang. Check out your portfolio center. Please also check ongoing floating volatility patterns of South Books and Da Nang.

Diversification Opportunities for South Books and Da Nang

-0.13

Correlation Coefficient

South Books  Da Nang

Good diversification

The 3 months correlation between South and DXV is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding South Books Educational and Da Nang Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Da Nang Construction and South Books 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 South Books Educational are associated (or correlated) with Da Nang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Da Nang Construction has no effect on the direction of South Books i.e., South Books and Da Nang go up and down completely randomly.

Pair Corralation between South Books and Da Nang

Assuming the 90 days trading horizon South Books is expected to generate 1.73 times less return on investment than Da Nang. In addition to that, South Books is 1.73 times more volatile than Da Nang Construction. It trades about 0.02 of its total potential returns per unit of risk. Da Nang Construction is currently generating about 0.06 per unit of volatility. If you would invest  392,000  in Da Nang Construction on October 25, 2024 and sell it today you would earn a total of  21,000  from holding Da Nang Construction or generate 5.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	45.24%
Values	Daily Returns

South Books Educational  vs.  Da Nang Construction

South Books Educational

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in South Books Educational are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, South Books is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Da Nang Construction

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Da Nang Construction are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Da Nang displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with South Books and Da Nang

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

The idea behind South Books Educational and Da Nang Construction 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.