Correlation Between Viet Nam and Everland Investment

Can any of the company-specific risk be diversified away by investing in both Viet Nam and Everland Investment 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 Viet Nam and Everland Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Viet Nam Construction and Everland Investment JSC, you can compare the effects of market volatilities on Viet Nam and Everland Investment 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 Viet Nam with a short position of Everland Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Viet Nam and Everland Investment.

Diversification Opportunities for Viet Nam and Everland Investment

0.11

Correlation Coefficient

Viet Nam  Everland Investment

Average diversification

The 3 months correlation between Viet and Everland is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Viet Nam Construction and Everland Investment JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Everland Investment JSC and Viet Nam 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 Viet Nam Construction are associated (or correlated) with Everland Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Everland Investment JSC has no effect on the direction of Viet Nam i.e., Viet Nam and Everland Investment go up and down completely randomly.

Pair Corralation between Viet Nam and Everland Investment

Assuming the 90 days trading horizon Viet Nam is expected to generate 1.9 times less return on investment than Everland Investment. In addition to that, Viet Nam is 1.75 times more volatile than Everland Investment JSC. It trades about 0.01 of its total potential returns per unit of risk. Everland Investment JSC is currently generating about 0.02 per unit of volatility. If you would invest  625,000  in Everland Investment JSC on December 20, 2024 and sell it today you would earn a total of  9,000  from holding Everland Investment JSC or generate 1.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	55.93%
Values	Daily Returns

Viet Nam Construction  vs.  Everland Investment JSC

Viet Nam Construction

Risk-Adjusted Performance

Very Weak

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

Everland Investment JSC

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Viet Nam and Everland Investment

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

The idea behind Viet Nam Construction and Everland Investment JSC 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.