Correlation Between Binh Duong and Ducgiang Chemicals

Can any of the company-specific risk be diversified away by investing in both Binh Duong and Ducgiang Chemicals 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 Ducgiang Chemicals 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 Ducgiang Chemicals Detergent, you can compare the effects of market volatilities on Binh Duong and Ducgiang Chemicals 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 Ducgiang Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Binh Duong and Ducgiang Chemicals.

Diversification Opportunities for Binh Duong and Ducgiang Chemicals

0.6

Correlation Coefficient

Binh Duong  Ducgiang Chemicals

Poor diversification

The 3 months correlation between Binh and Ducgiang is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Binh Duong Trade and Ducgiang Chemicals Detergent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ducgiang 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 Ducgiang Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ducgiang Chemicals has no effect on the direction of Binh Duong i.e., Binh Duong and Ducgiang Chemicals go up and down completely randomly.

Pair Corralation between Binh Duong and Ducgiang Chemicals

Assuming the 90 days trading horizon Binh Duong Trade is expected to generate 0.94 times more return on investment than Ducgiang Chemicals. However, Binh Duong Trade is 1.06 times less risky than Ducgiang Chemicals. It trades about 0.21 of its potential returns per unit of risk. Ducgiang Chemicals Detergent is currently generating about 0.06 per unit of risk. If you would invest  970,000  in Binh Duong Trade on October 3, 2024 and sell it today you would earn a total of  180,000  from holding Binh Duong Trade or generate 18.56% return on investment over 90 days.

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

Binh Duong Trade  vs.  Ducgiang Chemicals Detergent

Binh Duong Trade

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Binh Duong Trade are ranked lower than 16 (%) 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.

Ducgiang Chemicals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ducgiang Chemicals Detergent are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Ducgiang Chemicals is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Binh Duong and Ducgiang Chemicals

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

The idea behind Binh Duong Trade and Ducgiang Chemicals Detergent 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.