Correlation Between Vietnam National and POT

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

Diversification Opportunities for Vietnam National and POT

0.3

Correlation Coefficient

Vietnam National  POT

Weak diversification

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

Pair Corralation between Vietnam National and POT

Assuming the 90 days trading horizon Vietnam National is expected to generate 1.23 times less return on investment than POT. But when comparing it to its historical volatility, Vietnam National Reinsurance is 3.35 times less risky than POT. It trades about 0.16 of its potential returns per unit of risk. PostTelecommunication Equipment is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,560,000  in PostTelecommunication Equipment on December 21, 2024 and sell it today you would earn a total of  120,000  from holding PostTelecommunication Equipment or generate 7.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	71.19%
Values	Daily Returns

Vietnam National Reinsurance  vs.  PostTelecommunication Equipmen

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.

PostTelecommunication

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PostTelecommunication Equipment are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, POT displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vietnam National and POT

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

The idea behind Vietnam National Reinsurance and PostTelecommunication Equipment 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.