Correlation Between South Basic and Van Dien
Can any of the company-specific risk be diversified away by investing in both South Basic and Van Dien 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 Van Dien 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 Van Dien Fused, you can compare the effects of market volatilities on South Basic and Van Dien 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 Van Dien. Check out your portfolio center. Please also check ongoing floating volatility patterns of South Basic and Van Dien.
Diversification Opportunities for South Basic and Van Dien
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between South and Van is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding South Basic Chemicals and Van Dien Fused in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Van Dien Fused 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 Van Dien. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Van Dien Fused has no effect on the direction of South Basic i.e., South Basic and Van Dien go up and down completely randomly.
Pair Corralation between South Basic and Van Dien
Assuming the 90 days trading horizon South Basic Chemicals is expected to under-perform the Van Dien. But the stock apears to be less risky and, when comparing its historical volatility, South Basic Chemicals is 1.89 times less risky than Van Dien. The stock trades about -0.32 of its potential returns per unit of risk. The Van Dien Fused is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 1,305,000 in Van Dien Fused on November 3, 2024 and sell it today you would earn a total of 175,000 from holding Van Dien Fused or generate 13.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 61.11% |
| Values | Daily Returns |
South Basic Chemicals vs. Van Dien Fused
Performance |
| Timeline |
| South Basic Chemicals |
| Van Dien Fused |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
South Basic and Van Dien Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with South Basic and Van Dien
The main advantage of trading using opposite South Basic and Van Dien positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if South Basic position performs unexpectedly, Van Dien 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 Van Dien will offset losses from the drop in Van Dien's long position.| South Basic vs. Vien Dong Investment | South Basic vs. VTC Telecommunications JSC | South Basic vs. HUD1 Investment and | South Basic vs. PostTelecommunication Equipment |
| Van Dien vs. Investment and Industrial | Van Dien vs. PV2 Investment JSC | Van Dien vs. Hai An Transport | Van Dien vs. Industrial Urban Development |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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