Correlation Between Vietnam Dairy and Hochiminh City

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

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

Diversification Opportunities for Vietnam Dairy and Hochiminh City

-0.3

Correlation Coefficient

Vietnam Dairy  Hochiminh City

Very good diversification

The 3 months correlation between Vietnam and Hochiminh is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Vietnam Dairy Products and Hochiminh City Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hochiminh City Metal and Vietnam Dairy 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 Dairy Products are associated (or correlated) with Hochiminh City. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hochiminh City Metal has no effect on the direction of Vietnam Dairy i.e., Vietnam Dairy and Hochiminh City go up and down completely randomly.

Pair Corralation between Vietnam Dairy and Hochiminh City

Assuming the 90 days trading horizon Vietnam Dairy Products is expected to under-perform the Hochiminh City. But the stock apears to be less risky and, when comparing its historical volatility, Vietnam Dairy Products is 4.41 times less risky than Hochiminh City. The stock trades about -0.06 of its potential returns per unit of risk. The Hochiminh City Metal is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,160,000  in Hochiminh City Metal on October 9, 2024 and sell it today you would earn a total of  0.00  from holding Hochiminh City Metal or generate 0.0% return on investment over 90 days.

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

Vietnam Dairy Products  vs.  Hochiminh City Metal

Vietnam Dairy Products

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vietnam Dairy Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Hochiminh City Metal

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hochiminh City Metal are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Hochiminh City 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 Dairy and Hochiminh City

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

The idea behind Vietnam Dairy Products and Hochiminh City Metal 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.