Correlation Between Da Nang and Cotec Construction
Can any of the company-specific risk be diversified away by investing in both Da Nang and Cotec Construction 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 Cotec Construction 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 Cotec Construction JSC, you can compare the effects of market volatilities on Da Nang and Cotec Construction 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 Cotec Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Da Nang and Cotec Construction.
Diversification Opportunities for Da Nang and Cotec Construction
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between DXV and Cotec is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Da Nang Construction and Cotec Construction JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cotec Construction JSC 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 Cotec Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cotec Construction JSC has no effect on the direction of Da Nang i.e., Da Nang and Cotec Construction go up and down completely randomly.
Pair Corralation between Da Nang and Cotec Construction
Assuming the 90 days trading horizon Da Nang Construction is expected to generate 2.67 times more return on investment than Cotec Construction. However, Da Nang is 2.67 times more volatile than Cotec Construction JSC. It trades about 0.07 of its potential returns per unit of risk. Cotec Construction JSC is currently generating about -0.05 per unit of risk. If you would invest 370,000 in Da Nang Construction on August 31, 2024 and sell it today you would earn a total of 19,000 from holding Da Nang Construction or generate 5.14% 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. Cotec Construction JSC
Performance |
| Timeline |
| Da Nang Construction |
| Cotec Construction JSC |
Da Nang and Cotec Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Da Nang and Cotec Construction
The main advantage of trading using opposite Da Nang and Cotec Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Da Nang position performs unexpectedly, Cotec Construction 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 Cotec Construction will offset losses from the drop in Cotec Construction's long position.The idea behind Da Nang Construction and Cotec Construction 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.| Cotec Construction vs. FIT INVEST JSC | Cotec Construction vs. Damsan JSC | Cotec Construction vs. An Phat Plastic | Cotec Construction 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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