Correlation Between Binh Minh and Hochiminh City
Can any of the company-specific risk be diversified away by investing in both Binh Minh and Hochiminh City 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 Binh Minh and Hochiminh City into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Binh Minh Plastics and Hochiminh City Metal, you can compare the effects of market volatilities on Binh Minh and Hochiminh City 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 Binh Minh with a short position of Hochiminh City. Check out your portfolio center. Please also check ongoing floating volatility patterns of Binh Minh and Hochiminh City.
Diversification Opportunities for Binh Minh and Hochiminh City
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Binh and Hochiminh is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Binh Minh Plastics and Hochiminh City Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hochiminh City Metal and Binh Minh 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 Binh Minh Plastics are associated (or correlated) with Hochiminh City. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hochiminh City Metal has no effect on the direction of Binh Minh i.e., Binh Minh and Hochiminh City go up and down completely randomly.
Pair Corralation between Binh Minh and Hochiminh City
Assuming the 90 days trading horizon Binh Minh is expected to generate 1.38 times less return on investment than Hochiminh City. But when comparing it to its historical volatility, Binh Minh Plastics is 1.48 times less risky than Hochiminh City. It trades about 0.05 of its potential returns per unit of risk. Hochiminh City Metal is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,140,000 in Hochiminh City Metal on October 20, 2024 and sell it today you would earn a total of 25,000 from holding Hochiminh City Metal or generate 2.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Binh Minh Plastics vs. Hochiminh City Metal
Performance |
| Timeline |
| Binh Minh Plastics |
| Hochiminh City Metal |
Binh Minh and Hochiminh City Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Binh Minh and Hochiminh City
The main advantage of trading using opposite Binh Minh and Hochiminh City positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Binh Minh position performs unexpectedly, Hochiminh City 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 Hochiminh City will offset losses from the drop in Hochiminh City's long position.| Binh Minh vs. Transimex Transportation JSC | Binh Minh vs. South Basic Chemicals | Binh Minh vs. VTC Telecommunications JSC | Binh Minh vs. Pacific Petroleum Transportation |
| Hochiminh City vs. Development Investment Construction | Hochiminh City vs. Kien Giang Construction | Hochiminh City vs. Ducgiang Chemicals Detergent | Hochiminh City vs. Binhthuan Agriculture Services |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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