Correlation Between VICS and Vietnam Airlines

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

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

Diversification Opportunities for VICS and Vietnam Airlines

0.55

Correlation Coefficient

VICS  Vietnam Airlines

Very weak diversification

The 3 months correlation between VICS and Vietnam is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding VICS and Vietnam Airlines JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vietnam Airlines JSC and VICS 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 VICS are associated (or correlated) with Vietnam Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vietnam Airlines JSC has no effect on the direction of VICS i.e., VICS and Vietnam Airlines go up and down completely randomly.

Pair Corralation between VICS and Vietnam Airlines

Assuming the 90 days trading horizon VICS is expected to generate 1.08 times more return on investment than Vietnam Airlines. However, VICS is 1.08 times more volatile than Vietnam Airlines JSC. It trades about 0.21 of its potential returns per unit of risk. Vietnam Airlines JSC is currently generating about 0.02 per unit of risk. If you would invest  580,000  in VICS on December 29, 2024 and sell it today you would earn a total of  170,000  from holding VICS or generate 29.31% return on investment over 90 days.

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

VICS  vs.  Vietnam Airlines JSC

VICS

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in VICS 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, VICS displayed solid returns over the last few months and may actually be approaching a breakup point.

Vietnam Airlines JSC

Risk-Adjusted Performance

Weak

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

Pair Trading with VICS and Vietnam Airlines

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

The idea behind VICS and Vietnam Airlines 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.