Correlation Between Transport and Danang Rubber

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

By analyzing existing cross correlation between Transport and Industry and Danang Rubber JSC, you can compare the effects of market volatilities on Transport and Danang Rubber 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 Transport with a short position of Danang Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transport and Danang Rubber.

Diversification Opportunities for Transport and Danang Rubber

0.07

Correlation Coefficient

Transport  Danang Rubber

Significant diversification

The 3 months correlation between Transport and Danang is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Transport and Industry and Danang Rubber JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danang Rubber JSC and Transport 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 Transport and Industry are associated (or correlated) with Danang Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danang Rubber JSC has no effect on the direction of Transport i.e., Transport and Danang Rubber go up and down completely randomly.

Pair Corralation between Transport and Danang Rubber

Assuming the 90 days trading horizon Transport and Industry is expected to generate 1.55 times more return on investment than Danang Rubber. However, Transport is 1.55 times more volatile than Danang Rubber JSC. It trades about -0.22 of its potential returns per unit of risk. Danang Rubber JSC is currently generating about -0.47 per unit of risk. If you would invest  457,000  in Transport and Industry on October 24, 2024 and sell it today you would lose (28,000) from holding Transport and Industry or give up 6.13% of portfolio value over 90 days.

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

Transport and Industry  vs.  Danang Rubber JSC

Transport and Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transport and Industry has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Danang Rubber JSC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Transport and Danang Rubber

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

The idea behind Transport and Industry and Danang Rubber JSC 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 Global Correlations module to find global opportunities by holding instruments from different markets.