Correlation Between Sao Vang and Thong Nhat

Can any of the company-specific risk be diversified away by investing in both Sao Vang and Thong Nhat 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 Thong Nhat 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 Thong Nhat Rubber, you can compare the effects of market volatilities on Sao Vang and Thong Nhat 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 Thong Nhat. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sao Vang and Thong Nhat.

Diversification Opportunities for Sao Vang and Thong Nhat

0.2

Correlation Coefficient

Sao Vang  Thong Nhat

Modest diversification

The 3 months correlation between Sao and Thong is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Sao Vang Rubber and Thong Nhat Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thong Nhat Rubber 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 Thong Nhat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thong Nhat Rubber has no effect on the direction of Sao Vang i.e., Sao Vang and Thong Nhat go up and down completely randomly.

Pair Corralation between Sao Vang and Thong Nhat

Assuming the 90 days trading horizon Sao Vang Rubber is expected to generate 0.68 times more return on investment than Thong Nhat. However, Sao Vang Rubber is 1.47 times less risky than Thong Nhat. It trades about 0.07 of its potential returns per unit of risk. Thong Nhat Rubber is currently generating about 0.01 per unit of risk. If you would invest  2,450,000  in Sao Vang Rubber on December 28, 2024 and sell it today you would earn a total of  195,000  from holding Sao Vang Rubber or generate 7.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.7%
Values	Daily Returns

Sao Vang Rubber  vs.  Thong Nhat Rubber

Sao Vang Rubber

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sao Vang Rubber are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Sao Vang displayed solid returns over the last few months and may actually be approaching a breakup point.

Thong Nhat Rubber

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Thong Nhat Rubber are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Thong Nhat 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 Thong Nhat

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

The idea behind Sao Vang Rubber and Thong Nhat Rubber 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.