Correlation Between Danang Rubber and RangDong Plastic
Can any of the company-specific risk be diversified away by investing in both Danang Rubber and RangDong Plastic 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 Danang Rubber and RangDong Plastic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Danang Rubber JSC and RangDong Plastic JSC, you can compare the effects of market volatilities on Danang Rubber and RangDong Plastic 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 Danang Rubber with a short position of RangDong Plastic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Danang Rubber and RangDong Plastic.
Diversification Opportunities for Danang Rubber and RangDong Plastic
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Danang and RangDong is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Danang Rubber JSC and RangDong Plastic JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RangDong Plastic JSC and Danang Rubber 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 Danang Rubber JSC are associated (or correlated) with RangDong Plastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RangDong Plastic JSC has no effect on the direction of Danang Rubber i.e., Danang Rubber and RangDong Plastic go up and down completely randomly.
Pair Corralation between Danang Rubber and RangDong Plastic
Assuming the 90 days trading horizon Danang Rubber JSC is expected to generate 0.38 times more return on investment than RangDong Plastic. However, Danang Rubber JSC is 2.66 times less risky than RangDong Plastic. It trades about 0.07 of its potential returns per unit of risk. RangDong Plastic JSC is currently generating about -0.45 per unit of risk. If you would invest 2,810,000 in Danang Rubber JSC on September 3, 2024 and sell it today you would earn a total of 45,000 from holding Danang Rubber JSC or generate 1.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 90.48% |
| Values | Daily Returns |
Danang Rubber JSC vs. RangDong Plastic JSC
Performance |
| Timeline |
| Danang Rubber JSC |
| RangDong Plastic JSC |
Danang Rubber and RangDong Plastic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Danang Rubber and RangDong Plastic
The main advantage of trading using opposite Danang Rubber and RangDong Plastic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Danang Rubber position performs unexpectedly, RangDong Plastic 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 RangDong Plastic will offset losses from the drop in RangDong Plastic's long position.| Danang Rubber vs. VTC Telecommunications JSC | Danang Rubber vs. Hochiminh City Metal | Danang Rubber vs. Hanoi Beer Alcohol | Danang Rubber vs. Truong Thanh Furniture |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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