Correlation Between Vnsteel Vicasa and South Basic

Can any of the company-specific risk be diversified away by investing in both Vnsteel Vicasa and South Basic 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 Vnsteel Vicasa and South Basic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vnsteel Vicasa JSC and South Basic Chemicals, you can compare the effects of market volatilities on Vnsteel Vicasa and South Basic 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 Vnsteel Vicasa with a short position of South Basic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vnsteel Vicasa and South Basic.

Diversification Opportunities for Vnsteel Vicasa and South Basic

0.75

Correlation Coefficient

Vnsteel Vicasa  South Basic

Poor diversification

The 3 months correlation between Vnsteel and South is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Vnsteel Vicasa JSC and South Basic Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South Basic Chemicals and Vnsteel Vicasa 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 Vnsteel Vicasa JSC are associated (or correlated) with South Basic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South Basic Chemicals has no effect on the direction of Vnsteel Vicasa i.e., Vnsteel Vicasa and South Basic go up and down completely randomly.

Pair Corralation between Vnsteel Vicasa and South Basic

Assuming the 90 days trading horizon Vnsteel Vicasa JSC is expected to generate 2.68 times more return on investment than South Basic. However, Vnsteel Vicasa is 2.68 times more volatile than South Basic Chemicals. It trades about 0.54 of its potential returns per unit of risk. South Basic Chemicals is currently generating about 0.35 per unit of risk. If you would invest  850,000  in Vnsteel Vicasa JSC on September 21, 2024 and sell it today you would earn a total of  570,000  from holding Vnsteel Vicasa JSC or generate 67.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	77.27%
Values	Daily Returns

Vnsteel Vicasa JSC  vs.  South Basic Chemicals

Vnsteel Vicasa JSC

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vnsteel Vicasa JSC are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Vnsteel Vicasa displayed solid returns over the last few months and may actually be approaching a breakup point.

South Basic Chemicals

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in South Basic Chemicals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, South Basic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vnsteel Vicasa and South Basic

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

The idea behind Vnsteel Vicasa JSC and South Basic Chemicals 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.