Correlation Between Vietnam National and Dong Nai

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

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

Diversification Opportunities for Vietnam National and Dong Nai

-0.61

Correlation Coefficient

Vietnam National  Dong Nai

Excellent diversification

The 3 months correlation between Vietnam and Dong is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Vietnam National Reinsurance and Dong Nai Plastic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dong Nai Plastic and Vietnam National 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 National Reinsurance are associated (or correlated) with Dong Nai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dong Nai Plastic has no effect on the direction of Vietnam National i.e., Vietnam National and Dong Nai go up and down completely randomly.

Pair Corralation between Vietnam National and Dong Nai

Assuming the 90 days trading horizon Vietnam National Reinsurance is expected to generate 0.55 times more return on investment than Dong Nai. However, Vietnam National Reinsurance is 1.8 times less risky than Dong Nai. It trades about 0.16 of its potential returns per unit of risk. Dong Nai Plastic is currently generating about -0.04 per unit of risk. If you would invest  2,170,000  in Vietnam National Reinsurance on December 21, 2024 and sell it today you would earn a total of  310,000  from holding Vietnam National Reinsurance or generate 14.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	76.27%
Values	Daily Returns

Vietnam National Reinsurance  vs.  Dong Nai Plastic

Vietnam National Rei

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vietnam National Reinsurance are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Vietnam National displayed solid returns over the last few months and may actually be approaching a breakup point.

Dong Nai Plastic

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dong Nai Plastic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Dong Nai 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 National and Dong Nai

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

The idea behind Vietnam National Reinsurance and Dong Nai Plastic 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.