Correlation Between Tay Ninh and Vietnam Rubber

Can any of the company-specific risk be diversified away by investing in both Tay Ninh and Vietnam Rubber 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 Vietnam Rubber 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 Vietnam Rubber Group, you can compare the effects of market volatilities on Tay Ninh and Vietnam Rubber 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 Vietnam Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tay Ninh and Vietnam Rubber.

Diversification Opportunities for Tay Ninh and Vietnam Rubber

0.69

Correlation Coefficient

Tay Ninh  Vietnam Rubber

Poor diversification

The 3 months correlation between Tay and Vietnam is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Tay Ninh Rubber and Vietnam Rubber Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vietnam Rubber Group 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 Vietnam Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vietnam Rubber Group has no effect on the direction of Tay Ninh i.e., Tay Ninh and Vietnam Rubber go up and down completely randomly.

Pair Corralation between Tay Ninh and Vietnam Rubber

Assuming the 90 days trading horizon Tay Ninh Rubber is expected to generate 2.03 times more return on investment than Vietnam Rubber. However, Tay Ninh is 2.03 times more volatile than Vietnam Rubber Group. It trades about 0.25 of its potential returns per unit of risk. Vietnam Rubber Group is currently generating about 0.15 per unit of risk. If you would invest  5,490,000  in Tay Ninh Rubber on December 29, 2024 and sell it today you would earn a total of  2,900,000  from holding Tay Ninh Rubber or generate 52.82% return on investment over 90 days.

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

Tay Ninh Rubber  vs.  Vietnam Rubber Group

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.

Vietnam Rubber Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vietnam Rubber Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Vietnam Rubber displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tay Ninh and Vietnam Rubber

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

The idea behind Tay Ninh Rubber and Vietnam Rubber Group 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.