Correlation Between Hung Hau and Binhthuan Agriculture

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

Diversification Opportunities for Hung Hau and Binhthuan Agriculture

0.73
  Correlation Coefficient

Poor diversification

The 3 months correlation between Hung and Binhthuan is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Hung Hau Agricultural and Binhthuan Agriculture Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Binhthuan Agriculture and Hung Hau 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 Hung Hau Agricultural are associated (or correlated) with Binhthuan Agriculture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Binhthuan Agriculture has no effect on the direction of Hung Hau i.e., Hung Hau and Binhthuan Agriculture go up and down completely randomly.

Pair Corralation between Hung Hau and Binhthuan Agriculture

Assuming the 90 days trading horizon Hung Hau Agricultural is expected to generate 2.74 times more return on investment than Binhthuan Agriculture. However, Hung Hau is 2.74 times more volatile than Binhthuan Agriculture Services. It trades about 0.39 of its potential returns per unit of risk. Binhthuan Agriculture Services is currently generating about 0.18 per unit of risk. If you would invest  980,000  in Hung Hau Agricultural on August 30, 2024 and sell it today you would earn a total of  120,000  from holding Hung Hau Agricultural or generate 12.24% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy52.17%
ValuesDaily Returns

Hung Hau Agricultural  vs.  Binhthuan Agriculture Services

 Performance 
       Timeline  
Hung Hau Agricultural 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Hung Hau Agricultural has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Hung Hau is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.
Binhthuan Agriculture 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Binhthuan Agriculture Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Hung Hau and Binhthuan Agriculture Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hung Hau and Binhthuan Agriculture

The main advantage of trading using opposite Hung Hau and Binhthuan Agriculture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hung Hau position performs unexpectedly, Binhthuan Agriculture 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 Binhthuan Agriculture will offset losses from the drop in Binhthuan Agriculture's long position.
The idea behind Hung Hau Agricultural and Binhthuan Agriculture Services 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.
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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