Correlation Between Century Synthetic and VN Index
Can any of the company-specific risk be diversified away by investing in both Century Synthetic and VN Index 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 Century Synthetic and VN Index into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Century Synthetic Fiber and VN Index, you can compare the effects of market volatilities on Century Synthetic and VN Index 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 Century Synthetic with a short position of VN Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Synthetic and VN Index.
Diversification Opportunities for Century Synthetic and VN Index
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Century and VNI is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Century Synthetic Fiber and VN Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VN Index and Century Synthetic 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 Century Synthetic Fiber are associated (or correlated) with VN Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VN Index has no effect on the direction of Century Synthetic i.e., Century Synthetic and VN Index go up and down completely randomly.
Pair Corralation between Century Synthetic and VN Index
Assuming the 90 days trading horizon Century Synthetic Fiber is expected to under-perform the VN Index. In addition to that, Century Synthetic is 2.51 times more volatile than VN Index. It trades about 0.0 of its total potential returns per unit of risk. VN Index is currently generating about 0.05 per unit of volatility. If you would invest 112,550 in VN Index on September 4, 2024 and sell it today you would earn a total of 12,532 from holding VN Index or generate 11.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Century Synthetic Fiber vs. VN Index
Performance |
| Timeline |
Century Synthetic and VN Index Volatility Contrast
Predicted Return Density |
| Returns |
Century Synthetic Fiber
Pair trading matchups for Century Synthetic
VN Index
Pair trading matchups for VN Index
Pair Trading with Century Synthetic and VN Index
The main advantage of trading using opposite Century Synthetic and VN Index positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century Synthetic position performs unexpectedly, VN Index 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 Index will offset losses from the drop in VN Index's long position.The idea behind Century Synthetic Fiber and VN Index 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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