Correlation Between Binhthuan Agriculture and Damsan JSC
Can any of the company-specific risk be diversified away by investing in both Binhthuan Agriculture and Damsan JSC 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 Binhthuan Agriculture and Damsan JSC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Binhthuan Agriculture Services and Damsan JSC, you can compare the effects of market volatilities on Binhthuan Agriculture and Damsan JSC 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 Binhthuan Agriculture with a short position of Damsan JSC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Binhthuan Agriculture and Damsan JSC.
Diversification Opportunities for Binhthuan Agriculture and Damsan JSC
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Binhthuan and Damsan is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Binhthuan Agriculture Services and Damsan JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Damsan JSC and Binhthuan Agriculture 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 Binhthuan Agriculture Services are associated (or correlated) with Damsan JSC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Damsan JSC has no effect on the direction of Binhthuan Agriculture i.e., Binhthuan Agriculture and Damsan JSC go up and down completely randomly.
Pair Corralation between Binhthuan Agriculture and Damsan JSC
Assuming the 90 days trading horizon Binhthuan Agriculture Services is expected to generate 0.88 times more return on investment than Damsan JSC. However, Binhthuan Agriculture Services is 1.14 times less risky than Damsan JSC. It trades about 0.08 of its potential returns per unit of risk. Damsan JSC is currently generating about -0.2 per unit of risk. If you would invest 376,000 in Binhthuan Agriculture Services on August 24, 2024 and sell it today you would earn a total of 10,000 from holding Binhthuan Agriculture Services or generate 2.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Binhthuan Agriculture Services vs. Damsan JSC
Performance |
| Timeline |
| Binhthuan Agriculture |
| Damsan JSC |
Binhthuan Agriculture and Damsan JSC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Binhthuan Agriculture and Damsan JSC
The main advantage of trading using opposite Binhthuan Agriculture and Damsan JSC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Binhthuan Agriculture position performs unexpectedly, Damsan JSC 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 Damsan JSC will offset losses from the drop in Damsan JSC's long position.The idea behind Binhthuan Agriculture Services and Damsan JSC 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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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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