Correlation Between South Basic and Ben Thanh
Can any of the company-specific risk be diversified away by investing in both South Basic and Ben Thanh 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 South Basic and Ben Thanh into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between South Basic Chemicals and Ben Thanh Rubber, you can compare the effects of market volatilities on South Basic and Ben Thanh 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 South Basic with a short position of Ben Thanh. Check out your portfolio center. Please also check ongoing floating volatility patterns of South Basic and Ben Thanh.
Diversification Opportunities for South Basic and Ben Thanh
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between South and Ben is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding South Basic Chemicals and Ben Thanh Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ben Thanh Rubber and South Basic 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 South Basic Chemicals are associated (or correlated) with Ben Thanh. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ben Thanh Rubber has no effect on the direction of South Basic i.e., South Basic and Ben Thanh go up and down completely randomly.
Pair Corralation between South Basic and Ben Thanh
Assuming the 90 days trading horizon South Basic Chemicals is expected to under-perform the Ben Thanh. In addition to that, South Basic is 1.58 times more volatile than Ben Thanh Rubber. It trades about -0.25 of its total potential returns per unit of risk. Ben Thanh Rubber is currently generating about -0.01 per unit of volatility. If you would invest 1,435,000 in Ben Thanh Rubber on October 31, 2024 and sell it today you would lose (5,000) from holding Ben Thanh Rubber or give up 0.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.0% |
| Values | Daily Returns |
South Basic Chemicals vs. Ben Thanh Rubber
Performance |
| Timeline |
| South Basic Chemicals |
| Ben Thanh Rubber |
South Basic and Ben Thanh Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with South Basic and Ben Thanh
The main advantage of trading using opposite South Basic and Ben Thanh positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if South Basic position performs unexpectedly, Ben Thanh 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 Ben Thanh will offset losses from the drop in Ben Thanh's long position.| South Basic vs. VTC Telecommunications JSC | South Basic vs. DOMESCO Medical Import | South Basic vs. Transport and Industry | South Basic vs. Saigon Telecommunication Technologies |
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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