Correlation Between Cotec Construction and Southern Rubber
Can any of the company-specific risk be diversified away by investing in both Cotec Construction and Southern Rubber 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 Cotec Construction and Southern Rubber into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cotec Construction JSC and Southern Rubber Industry, you can compare the effects of market volatilities on Cotec Construction and Southern Rubber 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 Cotec Construction with a short position of Southern Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cotec Construction and Southern Rubber.
Diversification Opportunities for Cotec Construction and Southern Rubber
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cotec and Southern is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Cotec Construction JSC and Southern Rubber Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Rubber Industry and Cotec Construction 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 Cotec Construction JSC are associated (or correlated) with Southern Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Rubber Industry has no effect on the direction of Cotec Construction i.e., Cotec Construction and Southern Rubber go up and down completely randomly.
Pair Corralation between Cotec Construction and Southern Rubber
Assuming the 90 days trading horizon Cotec Construction is expected to generate 1.15 times less return on investment than Southern Rubber. But when comparing it to its historical volatility, Cotec Construction JSC is 2.1 times less risky than Southern Rubber. It trades about 0.23 of its potential returns per unit of risk. Southern Rubber Industry is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,290,000 in Southern Rubber Industry on October 26, 2024 and sell it today you would earn a total of 175,000 from holding Southern Rubber Industry or generate 13.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cotec Construction JSC vs. Southern Rubber Industry
Performance |
| Timeline |
| Cotec Construction JSC |
| Southern Rubber Industry |
Cotec Construction and Southern Rubber Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cotec Construction and Southern Rubber
The main advantage of trading using opposite Cotec Construction and Southern Rubber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cotec Construction position performs unexpectedly, Southern Rubber 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 Southern Rubber will offset losses from the drop in Southern Rubber's long position.| Cotec Construction vs. FIT INVEST JSC | Cotec Construction vs. Damsan JSC | Cotec Construction vs. An Phat Plastic | Cotec Construction vs. APG Securities Joint |
| Southern Rubber vs. FIT INVEST JSC | Southern Rubber vs. Damsan JSC | Southern Rubber vs. An Phat Plastic | Southern Rubber vs. APG Securities Joint |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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