Correlation Between Vietnam Maritime and BaoMinh Insurance

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

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

Diversification Opportunities for Vietnam Maritime and BaoMinh Insurance

-0.38

Correlation Coefficient

Vietnam Maritime  BaoMinh Insurance

Very good diversification

The 3 months correlation between Vietnam and BaoMinh is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Vietnam Maritime Development and BaoMinh Insurance Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BaoMinh Insurance Corp and Vietnam Maritime 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 Vietnam Maritime Development are associated (or correlated) with BaoMinh Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BaoMinh Insurance Corp has no effect on the direction of Vietnam Maritime i.e., Vietnam Maritime and BaoMinh Insurance go up and down completely randomly.

Pair Corralation between Vietnam Maritime and BaoMinh Insurance

Assuming the 90 days trading horizon Vietnam Maritime Development is expected to generate 6.52 times more return on investment than BaoMinh Insurance. However, Vietnam Maritime is 6.52 times more volatile than BaoMinh Insurance Corp. It trades about 0.11 of its potential returns per unit of risk. BaoMinh Insurance Corp is currently generating about -0.03 per unit of risk. If you would invest  2,290,000  in Vietnam Maritime Development on December 21, 2024 and sell it today you would earn a total of  500,000  from holding Vietnam Maritime Development or generate 21.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	54.24%
Values	Daily Returns

Vietnam Maritime Development  vs.  BaoMinh Insurance Corp

Vietnam Maritime Dev

Risk-Adjusted Performance

OK

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

BaoMinh Insurance Corp

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Vietnam Maritime and BaoMinh Insurance

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

The idea behind Vietnam Maritime Development and BaoMinh Insurance Corp 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.