Correlation Between Binhthuan Agriculture and Phuoc Hoa
Can any of the company-specific risk be diversified away by investing in both Binhthuan Agriculture and Phuoc Hoa 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 Phuoc Hoa 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 Phuoc Hoa Rubber, you can compare the effects of market volatilities on Binhthuan Agriculture and Phuoc Hoa 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 Phuoc Hoa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Binhthuan Agriculture and Phuoc Hoa.
Diversification Opportunities for Binhthuan Agriculture and Phuoc Hoa
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Binhthuan and Phuoc is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Binhthuan Agriculture Services and Phuoc Hoa Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phuoc Hoa Rubber 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 Phuoc Hoa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phuoc Hoa Rubber has no effect on the direction of Binhthuan Agriculture i.e., Binhthuan Agriculture and Phuoc Hoa go up and down completely randomly.
Pair Corralation between Binhthuan Agriculture and Phuoc Hoa
Assuming the 90 days trading horizon Binhthuan Agriculture Services is expected to generate 1.05 times more return on investment than Phuoc Hoa. However, Binhthuan Agriculture is 1.05 times more volatile than Phuoc Hoa Rubber. It trades about 0.08 of its potential returns per unit of risk. Phuoc Hoa Rubber is currently generating about -0.01 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 | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Binhthuan Agriculture Services vs. Phuoc Hoa Rubber
Performance |
| Timeline |
| Binhthuan Agriculture |
| Phuoc Hoa Rubber |
Binhthuan Agriculture and Phuoc Hoa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Binhthuan Agriculture and Phuoc Hoa
The main advantage of trading using opposite Binhthuan Agriculture and Phuoc Hoa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Binhthuan Agriculture position performs unexpectedly, Phuoc Hoa 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 Phuoc Hoa will offset losses from the drop in Phuoc Hoa's long position.The idea behind Binhthuan Agriculture Services and Phuoc Hoa Rubber 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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