Correlation Between Thong Nhat and Viet Thanh

Can any of the company-specific risk be diversified away by investing in both Thong Nhat and Viet Thanh 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 Viet Thanh 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 Viet Thanh Plastic, you can compare the effects of market volatilities on Thong Nhat and Viet Thanh 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 Viet Thanh. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thong Nhat and Viet Thanh.

Diversification Opportunities for Thong Nhat and Viet Thanh

-0.27

Correlation Coefficient

Thong Nhat  Viet Thanh

Very good diversification

The 3 months correlation between Thong and Viet is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Thong Nhat Rubber and Viet Thanh Plastic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viet Thanh Plastic 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 Viet Thanh. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viet Thanh Plastic has no effect on the direction of Thong Nhat i.e., Thong Nhat and Viet Thanh go up and down completely randomly.

Pair Corralation between Thong Nhat and Viet Thanh

Assuming the 90 days trading horizon Thong Nhat Rubber is expected to under-perform the Viet Thanh. In addition to that, Thong Nhat is 1.73 times more volatile than Viet Thanh Plastic. It trades about -0.04 of its total potential returns per unit of risk. Viet Thanh Plastic is currently generating about 0.13 per unit of volatility. If you would invest  1,420,000  in Viet Thanh Plastic on September 2, 2024 and sell it today you would earn a total of  280,000  from holding Viet Thanh Plastic or generate 19.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	63.49%
Values	Daily Returns

Thong Nhat Rubber  vs.  Viet Thanh Plastic

Thong Nhat Rubber

Risk-Adjusted Performance

0 of 100

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 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.

Viet Thanh Plastic

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Viet Thanh Plastic are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Viet Thanh displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Thong Nhat and Viet Thanh

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

The idea behind Thong Nhat Rubber and Viet Thanh Plastic 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.