Correlation Between South Basic and VN Index
Can any of the company-specific risk be diversified away by investing in both South Basic and VN Index 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 VN Index 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 VN Index, you can compare the effects of market volatilities on South Basic and VN Index 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 VN Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of South Basic and VN Index.
Diversification Opportunities for South Basic and VN Index
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between South and VNI is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding South Basic Chemicals and VN Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VN Index 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 VN Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VN Index has no effect on the direction of South Basic i.e., South Basic and VN Index go up and down completely randomly.
Pair Corralation between South Basic and VN Index
Assuming the 90 days trading horizon South Basic Chemicals is expected to generate 3.9 times more return on investment than VN Index. However, South Basic is 3.9 times more volatile than VN Index. It trades about 0.04 of its potential returns per unit of risk. VN Index is currently generating about -0.05 per unit of risk. If you would invest 3,935,000 in South Basic Chemicals on October 24, 2024 and sell it today you would earn a total of 265,000 from holding South Basic Chemicals or generate 6.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.84% |
| Values | Daily Returns |
South Basic Chemicals vs. VN Index
Performance |
| Timeline |
South Basic and VN Index Volatility Contrast
Predicted Return Density |
| Returns |
South Basic Chemicals
Pair trading matchups for South Basic
VN Index
Pair trading matchups for VN Index
Pair Trading with South Basic and VN Index
The main advantage of trading using opposite South Basic and VN Index positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if South Basic position performs unexpectedly, VN Index 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 VN Index will offset losses from the drop in VN Index's long position.| South Basic vs. Tin Nghia Industrial | South Basic vs. Innovative Technology Development | South Basic vs. Hanoi Beer Alcohol | South Basic vs. PetroVietnam Drilling Well |
| VN Index vs. Petrolimex International Trading | VN Index vs. South Basic Chemicals | VN Index vs. POST TELECOMMU | VN Index vs. SMC Investment Trading |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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