Correlation Between Vietnam National and Hochiminh City

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

Diversification Opportunities for Vietnam National and Hochiminh City

0.77
  Correlation Coefficient

Poor diversification

The 3 months correlation between Vietnam and Hochiminh is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Vietnam National Reinsurance and Hochiminh City Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hochiminh City Metal and Vietnam National 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 Vietnam National Reinsurance are associated (or correlated) with Hochiminh City. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hochiminh City Metal has no effect on the direction of Vietnam National i.e., Vietnam National and Hochiminh City go up and down completely randomly.

Pair Corralation between Vietnam National and Hochiminh City

Assuming the 90 days trading horizon Vietnam National Reinsurance is expected to generate 0.83 times more return on investment than Hochiminh City. However, Vietnam National Reinsurance is 1.21 times less risky than Hochiminh City. It trades about 0.04 of its potential returns per unit of risk. Hochiminh City Metal is currently generating about 0.03 per unit of risk. If you would invest  1,932,860  in Vietnam National Reinsurance on August 24, 2024 and sell it today you would earn a total of  367,140  from holding Vietnam National Reinsurance or generate 18.99% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Vietnam National Reinsurance  vs.  Hochiminh City Metal

 Performance 
       Timeline  
Vietnam National Rei 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Vietnam National Reinsurance 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.
Hochiminh City Metal 

Risk-Adjusted Performance

0 of 100

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

Vietnam National and Hochiminh City Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vietnam National and Hochiminh City

The main advantage of trading using opposite Vietnam National and Hochiminh City positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vietnam National position performs unexpectedly, Hochiminh City 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 Hochiminh City will offset losses from the drop in Hochiminh City's long position.
The idea behind Vietnam National Reinsurance and Hochiminh City Metal 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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