Correlation Between Van Dien and Dong A

Can any of the company-specific risk be diversified away by investing in both Van Dien and Dong A 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 Van Dien and Dong A into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Van Dien Fused and Dong A Hotel, you can compare the effects of market volatilities on Van Dien and Dong A 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 Van Dien with a short position of Dong A. Check out your portfolio center. Please also check ongoing floating volatility patterns of Van Dien and Dong A.

Diversification Opportunities for Van Dien and Dong A

0.26

Correlation Coefficient

Van Dien  Dong A

Modest diversification

The 3 months correlation between Van and Dong is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Van Dien Fused and Dong A Hotel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dong A Hotel and Van Dien 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 Van Dien Fused are associated (or correlated) with Dong A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dong A Hotel has no effect on the direction of Van Dien i.e., Van Dien and Dong A go up and down completely randomly.

Pair Corralation between Van Dien and Dong A

Assuming the 90 days trading horizon Van Dien Fused is expected to generate 1.73 times more return on investment than Dong A. However, Van Dien is 1.73 times more volatile than Dong A Hotel. It trades about 0.21 of its potential returns per unit of risk. Dong A Hotel is currently generating about 0.1 per unit of risk. If you would invest  1,315,000  in Van Dien Fused on December 19, 2024 and sell it today you would earn a total of  505,000  from holding Van Dien Fused or generate 38.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	65.52%
Values	Daily Returns

Van Dien Fused  vs.  Dong A Hotel

Van Dien Fused

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Van Dien Fused are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Van Dien displayed solid returns over the last few months and may actually be approaching a breakup point.

Dong A Hotel

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dong A Hotel are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical indicators, Dong A displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Van Dien and Dong A

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

The idea behind Van Dien Fused and Dong A Hotel 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.