Correlation Between Sao Vang and Ducgiang Chemicals

Can any of the company-specific risk be diversified away by investing in both Sao Vang and Ducgiang Chemicals 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 Sao Vang and Ducgiang Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sao Vang Rubber and Ducgiang Chemicals Detergent, you can compare the effects of market volatilities on Sao Vang and Ducgiang Chemicals 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 Sao Vang with a short position of Ducgiang Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sao Vang and Ducgiang Chemicals.

Diversification Opportunities for Sao Vang and Ducgiang Chemicals

-0.1

Correlation Coefficient

Sao Vang  Ducgiang Chemicals

Good diversification

The 3 months correlation between Sao and Ducgiang is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Sao Vang Rubber and Ducgiang Chemicals Detergent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ducgiang Chemicals and Sao Vang 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 Sao Vang Rubber are associated (or correlated) with Ducgiang Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ducgiang Chemicals has no effect on the direction of Sao Vang i.e., Sao Vang and Ducgiang Chemicals go up and down completely randomly.

Pair Corralation between Sao Vang and Ducgiang Chemicals

Assuming the 90 days trading horizon Sao Vang Rubber is expected to generate 2.58 times more return on investment than Ducgiang Chemicals. However, Sao Vang is 2.58 times more volatile than Ducgiang Chemicals Detergent. It trades about 0.05 of its potential returns per unit of risk. Ducgiang Chemicals Detergent is currently generating about 0.03 per unit of risk. If you would invest  2,570,000  in Sao Vang Rubber on December 2, 2024 and sell it today you would earn a total of  130,000  from holding Sao Vang Rubber or generate 5.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	73.33%
Values	Daily Returns

Sao Vang Rubber  vs.  Ducgiang Chemicals Detergent

Sao Vang Rubber

Risk-Adjusted Performance

Insignificant

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

Ducgiang Chemicals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ducgiang Chemicals Detergent are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Ducgiang Chemicals is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Sao Vang and Ducgiang Chemicals

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

The idea behind Sao Vang Rubber and Ducgiang Chemicals Detergent 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.