Correlation Between Vu Dang and LAM THAO

Can any of the company-specific risk be diversified away by investing in both Vu Dang and LAM THAO 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 Vu Dang and LAM THAO into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vu Dang Investment and LAM THAO FERTI, you can compare the effects of market volatilities on Vu Dang and LAM THAO 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 Vu Dang with a short position of LAM THAO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vu Dang and LAM THAO.

Diversification Opportunities for Vu Dang and LAM THAO

0.2

Correlation Coefficient

Vu Dang  LAM THAO

Modest diversification

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

Pair Corralation between Vu Dang and LAM THAO

Assuming the 90 days trading horizon Vu Dang Investment is expected to generate 1.03 times more return on investment than LAM THAO. However, Vu Dang is 1.03 times more volatile than LAM THAO FERTI. It trades about 0.02 of its potential returns per unit of risk. LAM THAO FERTI is currently generating about -0.15 per unit of risk. If you would invest  326,000  in Vu Dang Investment on December 28, 2024 and sell it today you would earn a total of  3,000  from holding Vu Dang Investment or generate 0.92% return on investment over 90 days.

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

Vu Dang Investment  vs.  LAM THAO FERTI

Vu Dang Investment

Risk-Adjusted Performance

Weak

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

LAM THAO FERTI

Risk-Adjusted Performance

Very Weak

Over the last 90 days LAM THAO FERTI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Vu Dang and LAM THAO

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

The idea behind Vu Dang Investment and LAM THAO FERTI 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.