Correlation Between Binh Duong and South Basic

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

By analyzing existing cross correlation between Binh Duong Trade and South Basic Chemicals, you can compare the effects of market volatilities on Binh Duong and South Basic 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 Binh Duong with a short position of South Basic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Binh Duong and South Basic.

Diversification Opportunities for Binh Duong and South Basic

0.35

Correlation Coefficient

Binh Duong  South Basic

Weak diversification

The 3 months correlation between Binh and South is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Binh Duong Trade and South Basic Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South Basic Chemicals and Binh Duong 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 Binh Duong Trade are associated (or correlated) with South Basic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South Basic Chemicals has no effect on the direction of Binh Duong i.e., Binh Duong and South Basic go up and down completely randomly.

Pair Corralation between Binh Duong and South Basic

Assuming the 90 days trading horizon Binh Duong Trade is expected to generate 1.11 times more return on investment than South Basic. However, Binh Duong is 1.11 times more volatile than South Basic Chemicals. It trades about 0.07 of its potential returns per unit of risk. South Basic Chemicals is currently generating about 0.05 per unit of risk. If you would invest  1,225,000  in Binh Duong Trade on December 4, 2024 and sell it today you would earn a total of  35,000  from holding Binh Duong Trade or generate 2.86% return on investment over 90 days.

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

Binh Duong Trade  vs.  South Basic Chemicals

Binh Duong Trade

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Binh Duong Trade are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Binh Duong displayed solid returns over the last few months and may actually be approaching a breakup point.

South Basic Chemicals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in South Basic Chemicals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, South Basic displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Binh Duong and South Basic

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

The idea behind Binh Duong Trade and South Basic Chemicals 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.