Correlation Between Mechanics Construction and Saigon Machinery
Can any of the company-specific risk be diversified away by investing in both Mechanics Construction and Saigon Machinery 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 Mechanics Construction and Saigon Machinery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mechanics Construction and and Saigon Machinery Spare, you can compare the effects of market volatilities on Mechanics Construction and Saigon Machinery 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 Mechanics Construction with a short position of Saigon Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mechanics Construction and Saigon Machinery.
Diversification Opportunities for Mechanics Construction and Saigon Machinery
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Mechanics and Saigon is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Mechanics Construction and and Saigon Machinery Spare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saigon Machinery Spare and Mechanics Construction 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 Mechanics Construction and are associated (or correlated) with Saigon Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saigon Machinery Spare has no effect on the direction of Mechanics Construction i.e., Mechanics Construction and Saigon Machinery go up and down completely randomly.
Pair Corralation between Mechanics Construction and Saigon Machinery
Assuming the 90 days trading horizon Mechanics Construction is expected to generate 3.38 times less return on investment than Saigon Machinery. But when comparing it to its historical volatility, Mechanics Construction and is 1.79 times less risky than Saigon Machinery. It trades about 0.05 of its potential returns per unit of risk. Saigon Machinery Spare is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 739,967 in Saigon Machinery Spare on October 16, 2024 and sell it today you would earn a total of 860,033 from holding Saigon Machinery Spare or generate 116.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 68.54% |
| Values | Daily Returns |
Mechanics Construction and vs. Saigon Machinery Spare
Performance |
| Timeline |
| Mechanics Construction |
| Saigon Machinery Spare |
Mechanics Construction and Saigon Machinery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mechanics Construction and Saigon Machinery
The main advantage of trading using opposite Mechanics Construction and Saigon Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mechanics Construction position performs unexpectedly, Saigon Machinery 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 Saigon Machinery will offset losses from the drop in Saigon Machinery's long position.The idea behind Mechanics Construction and and Saigon Machinery Spare 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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