Correlation Between Hochiminh City and VN 30

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Can any of the company-specific risk be diversified away by investing in both Hochiminh City and VN 30 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 Hochiminh City and VN 30 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hochiminh City Metal and VN 30, you can compare the effects of market volatilities on Hochiminh City and VN 30 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 Hochiminh City with a short position of VN 30. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hochiminh City and VN 30.

Diversification Opportunities for Hochiminh City and VN 30

0.25
  Correlation Coefficient

Modest diversification

The 3 months correlation between Hochiminh and VNI30 is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Hochiminh City Metal and VN 30 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VN 30 and Hochiminh City 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 Hochiminh City Metal are associated (or correlated) with VN 30. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VN 30 has no effect on the direction of Hochiminh City i.e., Hochiminh City and VN 30 go up and down completely randomly.
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Pair Corralation between Hochiminh City and VN 30

Assuming the 90 days trading horizon Hochiminh City Metal is expected to generate 1.18 times more return on investment than VN 30. However, Hochiminh City is 1.18 times more volatile than VN 30. It trades about 0.26 of its potential returns per unit of risk. VN 30 is currently generating about 0.15 per unit of risk. If you would invest  1,095,000  in Hochiminh City Metal on September 13, 2024 and sell it today you would earn a total of  65,000  from holding Hochiminh City Metal or generate 5.94% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy95.65%
ValuesDaily Returns

Hochiminh City Metal  vs.  VN 30

 Performance 
       Timeline  

Hochiminh City and VN 30 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hochiminh City and VN 30

The main advantage of trading using opposite Hochiminh City and VN 30 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hochiminh City position performs unexpectedly, VN 30 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 VN 30 will offset losses from the drop in VN 30's long position.
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The idea behind Hochiminh City Metal and VN 30 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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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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