Correlation Between Summit Materials and VinFast Auto

Can any of the company-specific risk be diversified away by investing in both Summit Materials and VinFast Auto 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 Summit Materials and VinFast Auto into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Summit Materials and VinFast Auto Ltd, you can compare the effects of market volatilities on Summit Materials and VinFast Auto 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 Summit Materials with a short position of VinFast Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and VinFast Auto.

Diversification Opportunities for Summit Materials and VinFast Auto

-0.49

Correlation Coefficient

Summit Materials  VinFast Auto

Very good diversification

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

Pair Corralation between Summit Materials and VinFast Auto

Considering the 90-day investment horizon Summit Materials is expected to generate 3.25 times less return on investment than VinFast Auto. But when comparing it to its historical volatility, Summit Materials is 28.88 times less risky than VinFast Auto. It trades about 0.18 of its potential returns per unit of risk. VinFast Auto Ltd is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  39.00  in VinFast Auto Ltd on December 2, 2024 and sell it today you would lose (6.00) from holding VinFast Auto Ltd or give up 15.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	78.69%
Values	Daily Returns

Summit Materials  vs.  VinFast Auto Ltd

Summit Materials

Risk-Adjusted Performance

Good

Over the last 90 days Summit Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Summit Materials is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

VinFast Auto

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in VinFast Auto Ltd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, VinFast Auto showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Summit Materials and VinFast Auto

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

The idea behind Summit Materials and VinFast Auto Ltd 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.