Correlation Between Thong Nhat and Hochiminh City

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

By analyzing existing cross correlation between Thong Nhat Rubber and Hochiminh City Metal, you can compare the effects of market volatilities on Thong Nhat and Hochiminh City 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 Thong Nhat with a short position of Hochiminh City. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thong Nhat and Hochiminh City.

Diversification Opportunities for Thong Nhat and Hochiminh City

0.21

Correlation Coefficient

Thong Nhat  Hochiminh City

Modest diversification

The 3 months correlation between Thong and Hochiminh is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Thong Nhat Rubber and Hochiminh City Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hochiminh City Metal and Thong Nhat 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 Thong Nhat Rubber are associated (or correlated) with Hochiminh City. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hochiminh City Metal has no effect on the direction of Thong Nhat i.e., Thong Nhat and Hochiminh City go up and down completely randomly.

Pair Corralation between Thong Nhat and Hochiminh City

Assuming the 90 days trading horizon Thong Nhat Rubber is expected to under-perform the Hochiminh City. In addition to that, Thong Nhat is 2.03 times more volatile than Hochiminh City Metal. It trades about -0.02 of its total potential returns per unit of risk. Hochiminh City Metal is currently generating about 0.02 per unit of volatility. If you would invest  1,195,000  in Hochiminh City Metal on December 30, 2024 and sell it today you would earn a total of  10,000  from holding Hochiminh City Metal or generate 0.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	75.0%
Values	Daily Returns

Thong Nhat Rubber  vs.  Hochiminh City Metal

Thong Nhat Rubber

Risk-Adjusted Performance

Very Weak

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

Hochiminh City Metal

Risk-Adjusted Performance

Weak

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

Pair Trading with Thong Nhat and Hochiminh City

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

The idea behind Thong Nhat Rubber and Hochiminh City Metal 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 Transaction History module to view history of all your transactions and understand their impact on performance.