Correlation Between Vietnam Dairy and Transport

Can any of the company-specific risk be diversified away by investing in both Vietnam Dairy and Transport 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 Transport 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 Transport and Industry, you can compare the effects of market volatilities on Vietnam Dairy and Transport 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 Transport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vietnam Dairy and Transport.

Diversification Opportunities for Vietnam Dairy and Transport

0.8

Correlation Coefficient

Vietnam Dairy  Transport

Very poor diversification

The 3 months correlation between Vietnam and Transport is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Vietnam Dairy Products and Transport and Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transport and Industry 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 Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transport and Industry has no effect on the direction of Vietnam Dairy i.e., Vietnam Dairy and Transport go up and down completely randomly.

Pair Corralation between Vietnam Dairy and Transport

Assuming the 90 days trading horizon Vietnam Dairy Products is expected to generate 0.46 times more return on investment than Transport. However, Vietnam Dairy Products is 2.16 times less risky than Transport. It trades about -0.11 of its potential returns per unit of risk. Transport and Industry is currently generating about -0.11 per unit of risk. If you would invest  6,657,823  in Vietnam Dairy Products on October 7, 2024 and sell it today you would lose (347,823) from holding Vietnam Dairy Products or give up 5.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

Vietnam Dairy Products  vs.  Transport and Industry

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 very healthy primary indicators, Vietnam Dairy is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Transport and Industry

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Vietnam Dairy and Transport

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

The idea behind Vietnam Dairy Products and Transport and Industry 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.