Correlation Between Tay Ninh and Binh Minh

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

By analyzing existing cross correlation between Tay Ninh Rubber and Binh Minh Plastics, you can compare the effects of market volatilities on Tay Ninh and Binh Minh 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 Tay Ninh with a short position of Binh Minh. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tay Ninh and Binh Minh.

Diversification Opportunities for Tay Ninh and Binh Minh

-0.83

Correlation Coefficient

Tay Ninh  Binh Minh

Pay attention - limited upside

The 3 months correlation between Tay and Binh is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Tay Ninh Rubber and Binh Minh Plastics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Binh Minh Plastics and Tay Ninh 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 Tay Ninh Rubber are associated (or correlated) with Binh Minh. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Binh Minh Plastics has no effect on the direction of Tay Ninh i.e., Tay Ninh and Binh Minh go up and down completely randomly.

Pair Corralation between Tay Ninh and Binh Minh

Assuming the 90 days trading horizon Tay Ninh Rubber is expected to generate 1.7 times more return on investment than Binh Minh. However, Tay Ninh is 1.7 times more volatile than Binh Minh Plastics. It trades about 0.24 of its potential returns per unit of risk. Binh Minh Plastics is currently generating about -0.03 per unit of risk. If you would invest  5,260,000  in Tay Ninh Rubber on December 20, 2024 and sell it today you would earn a total of  2,640,000  from holding Tay Ninh Rubber or generate 50.19% return on investment over 90 days.

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

Tay Ninh Rubber  vs.  Binh Minh Plastics

Tay Ninh Rubber

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tay Ninh Rubber are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Tay Ninh displayed solid returns over the last few months and may actually be approaching a breakup point.

Binh Minh Plastics

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Tay Ninh and Binh Minh

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

The idea behind Tay Ninh Rubber and Binh Minh Plastics 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.