Correlation Between Development Investment and Truong Thanh
Can any of the company-specific risk be diversified away by investing in both Development Investment and Truong Thanh 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 Development Investment and Truong Thanh into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Development Investment Construction and Truong Thanh Furniture, you can compare the effects of market volatilities on Development Investment and Truong Thanh 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 Development Investment with a short position of Truong Thanh. Check out your portfolio center. Please also check ongoing floating volatility patterns of Development Investment and Truong Thanh.
Diversification Opportunities for Development Investment and Truong Thanh
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Development and Truong is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Development Investment Constru and Truong Thanh Furniture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Truong Thanh Furniture and Development Investment 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 Development Investment Construction are associated (or correlated) with Truong Thanh. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Truong Thanh Furniture has no effect on the direction of Development Investment i.e., Development Investment and Truong Thanh go up and down completely randomly.
Pair Corralation between Development Investment and Truong Thanh
Assuming the 90 days trading horizon Development Investment Construction is expected to generate 1.3 times more return on investment than Truong Thanh. However, Development Investment is 1.3 times more volatile than Truong Thanh Furniture. It trades about -0.04 of its potential returns per unit of risk. Truong Thanh Furniture is currently generating about -0.08 per unit of risk. If you would invest 2,645,000 in Development Investment Construction on September 2, 2024 and sell it today you would lose (615,000) from holding Development Investment Construction or give up 23.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Development Investment Constru vs. Truong Thanh Furniture
Performance |
| Timeline |
| Development Investment |
| Truong Thanh Furniture |
Development Investment and Truong Thanh Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Development Investment and Truong Thanh
The main advantage of trading using opposite Development Investment and Truong Thanh positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Development Investment position performs unexpectedly, Truong Thanh 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 Truong Thanh will offset losses from the drop in Truong Thanh's long position.The idea behind Development Investment Construction and Truong Thanh Furniture 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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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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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