Correlation Between Dong A and Hanoi Plastics

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Can any of the company-specific risk be diversified away by investing in both Dong A and Hanoi Plastics 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 Dong A and Hanoi Plastics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dong A Hotel and Hanoi Plastics JSC, you can compare the effects of market volatilities on Dong A and Hanoi Plastics 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 Dong A with a short position of Hanoi Plastics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dong A and Hanoi Plastics.

Diversification Opportunities for Dong A and Hanoi Plastics

DongHanoiDiversified AwayDongHanoiDiversified Away100%
-0.2
  Correlation Coefficient

Good diversification

The 3 months correlation between Dong and Hanoi is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Dong A Hotel and Hanoi Plastics JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanoi Plastics JSC and Dong A 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 Dong A Hotel are associated (or correlated) with Hanoi Plastics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanoi Plastics JSC has no effect on the direction of Dong A i.e., Dong A and Hanoi Plastics go up and down completely randomly.

Pair Corralation between Dong A and Hanoi Plastics

Assuming the 90 days trading horizon Dong A Hotel is expected to generate 2.05 times more return on investment than Hanoi Plastics. However, Dong A is 2.05 times more volatile than Hanoi Plastics JSC. It trades about 0.27 of its potential returns per unit of risk. Hanoi Plastics JSC is currently generating about -0.09 per unit of risk. If you would invest  328,000  in Dong A Hotel on November 20, 2024 and sell it today you would earn a total of  31,000  from holding Dong A Hotel or generate 9.45% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Dong A Hotel  vs.  Hanoi Plastics JSC

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -15-10-505
JavaScript chart by amCharts 3.21.15DAH NHH
       Timeline  
Dong A Hotel 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Dong A Hotel are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical indicators, Dong A displayed solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb3,1003,2003,3003,4003,5003,6003,7003,800
Hanoi Plastics JSC 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Hanoi Plastics JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Hanoi Plastics is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb12,40012,60012,80013,00013,20013,40013,60013,800

Dong A and Hanoi Plastics Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-8.29-6.21-4.13-2.05-0.022.084.286.478.6610.85 0.10.20.30.4
JavaScript chart by amCharts 3.21.15DAH NHH
       Returns  

Pair Trading with Dong A and Hanoi Plastics

The main advantage of trading using opposite Dong A and Hanoi Plastics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dong A position performs unexpectedly, Hanoi Plastics 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 Hanoi Plastics will offset losses from the drop in Hanoi Plastics' long position.
The idea behind Dong A Hotel and Hanoi Plastics JSC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.

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