Correlation Between Da Nang and Ben Thanh
Can any of the company-specific risk be diversified away by investing in both Da Nang and Ben 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 Da Nang and Ben Thanh into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Da Nang Construction and Ben Thanh Rubber, you can compare the effects of market volatilities on Da Nang and Ben 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 Da Nang with a short position of Ben Thanh. Check out your portfolio center. Please also check ongoing floating volatility patterns of Da Nang and Ben Thanh.
Diversification Opportunities for Da Nang and Ben Thanh
Very weak diversification
The 3 months correlation between DXV and Ben is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Da Nang Construction and Ben Thanh Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ben Thanh Rubber and Da Nang 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 Da Nang Construction are associated (or correlated) with Ben Thanh. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ben Thanh Rubber has no effect on the direction of Da Nang i.e., Da Nang and Ben Thanh go up and down completely randomly.
Pair Corralation between Da Nang and Ben Thanh
Assuming the 90 days trading horizon Da Nang is expected to generate 2.1 times less return on investment than Ben Thanh. In addition to that, Da Nang is 3.5 times more volatile than Ben Thanh Rubber. It trades about 0.03 of its total potential returns per unit of risk. Ben Thanh Rubber is currently generating about 0.21 per unit of volatility. If you would invest 1,265,000 in Ben Thanh Rubber on September 2, 2024 and sell it today you would earn a total of 140,000 from holding Ben Thanh Rubber or generate 11.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Da Nang Construction vs. Ben Thanh Rubber
Performance |
| Timeline |
| Da Nang Construction |
| Ben Thanh Rubber |
Da Nang and Ben Thanh Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Da Nang and Ben Thanh
The main advantage of trading using opposite Da Nang and Ben Thanh positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Da Nang position performs unexpectedly, Ben 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 Ben Thanh will offset losses from the drop in Ben Thanh's long position.The idea behind Da Nang Construction and Ben Thanh Rubber 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.| Ben Thanh vs. FIT INVEST JSC | Ben Thanh vs. Damsan JSC | Ben Thanh vs. An Phat Plastic | Ben Thanh vs. Alphanam ME |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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