Correlation Between Vietnam National and FPT Corp

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

Diversification Opportunities for Vietnam National and FPT Corp

-0.7

Correlation Coefficient

Vietnam National  FPT Corp

Excellent diversification

The 3 months correlation between Vietnam and FPT is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Vietnam National Reinsurance and FPT Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FPT Corp 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 FPT Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FPT Corp has no effect on the direction of Vietnam National i.e., Vietnam National and FPT Corp go up and down completely randomly.

Pair Corralation between Vietnam National and FPT Corp

Assuming the 90 days trading horizon Vietnam National Reinsurance is expected to generate 1.02 times more return on investment than FPT Corp. However, Vietnam National is 1.02 times more volatile than FPT Corp. It trades about 0.17 of its potential returns per unit of risk. FPT Corp is currently generating about -0.21 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	100.0%
Values	Daily Returns

Vietnam National Reinsurance  vs.  FPT Corp

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 13 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Vietnam National displayed solid returns over the last few months and may actually be approaching a breakup point.

FPT Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days FPT Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Vietnam National and FPT Corp

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

The idea behind Vietnam National Reinsurance and FPT 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.