Correlation Between Dong A and Phat Dat
Can any of the company-specific risk be diversified away by investing in both Dong A and Phat Dat 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 Phat Dat 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 Phat Dat Real, you can compare the effects of market volatilities on Dong A and Phat Dat 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 Phat Dat. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dong A and Phat Dat.
Diversification Opportunities for Dong A and Phat Dat
Very weak diversification
The 3 months correlation between Dong and Phat is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Dong A Hotel and Phat Dat Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phat Dat Real 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 Phat Dat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phat Dat Real has no effect on the direction of Dong A i.e., Dong A and Phat Dat go up and down completely randomly.
Pair Corralation between Dong A and Phat Dat
Assuming the 90 days trading horizon Dong A Hotel is expected to under-perform the Phat Dat. But the stock apears to be less risky and, when comparing its historical volatility, Dong A Hotel is 2.09 times less risky than Phat Dat. The stock trades about -0.13 of its potential returns per unit of risk. The Phat Dat Real is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 2,511,597 in Phat Dat Real on September 4, 2024 and sell it today you would lose (426,597) from holding Phat Dat Real or give up 16.99% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dong A Hotel vs. Phat Dat Real
Performance |
| Timeline |
| Dong A Hotel |
| Phat Dat Real |
Dong A and Phat Dat Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dong A and Phat Dat
The main advantage of trading using opposite Dong A and Phat Dat positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dong A position performs unexpectedly, Phat Dat 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 Phat Dat will offset losses from the drop in Phat Dat's long position.| Dong A vs. Alphanam ME | Dong A vs. Hochiminh City Metal | Dong A vs. Atesco Industrial Cartering | Dong A vs. Danang Education Investment |
| Phat Dat vs. DIC Holdings Construction | Phat Dat vs. Viettel Construction JSC | Phat Dat vs. Da Nang Construction | Phat Dat vs. Vinhomes JSC |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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