Correlation Between Her Chee and Vietnam Manufacturing

Can any of the company-specific risk be diversified away by investing in both Her Chee and Vietnam Manufacturing 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 Her Chee and Vietnam Manufacturing into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Her Chee Industrial and Vietnam Manufacturing and, you can compare the effects of market volatilities on Her Chee and Vietnam Manufacturing 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 Her Chee with a short position of Vietnam Manufacturing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Her Chee and Vietnam Manufacturing.

Diversification Opportunities for Her Chee and Vietnam Manufacturing

-0.63

Correlation Coefficient

Her Chee  Vietnam Manufacturing

Excellent diversification

The 3 months correlation between Her and Vietnam is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Her Chee Industrial and Vietnam Manufacturing and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vietnam Manufacturing and and Her Chee 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 Her Chee Industrial are associated (or correlated) with Vietnam Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vietnam Manufacturing and has no effect on the direction of Her Chee i.e., Her Chee and Vietnam Manufacturing go up and down completely randomly.

Pair Corralation between Her Chee and Vietnam Manufacturing

Assuming the 90 days trading horizon Her Chee Industrial is expected to generate 3.56 times more return on investment than Vietnam Manufacturing. However, Her Chee is 3.56 times more volatile than Vietnam Manufacturing and. It trades about 0.33 of its potential returns per unit of risk. Vietnam Manufacturing and is currently generating about -0.05 per unit of risk. If you would invest  6,640  in Her Chee Industrial on September 3, 2024 and sell it today you would earn a total of  7,860  from holding Her Chee Industrial or generate 118.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Her Chee Industrial  vs.  Vietnam Manufacturing and

Her Chee Industrial

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Her Chee Industrial are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Her Chee showed solid returns over the last few months and may actually be approaching a breakup point.

Vietnam Manufacturing and

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vietnam Manufacturing and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Vietnam Manufacturing is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Her Chee and Vietnam Manufacturing

The main advantage of trading using opposite Her Chee and Vietnam Manufacturing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Her Chee position performs unexpectedly, Vietnam Manufacturing 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 Vietnam Manufacturing will offset losses from the drop in Vietnam Manufacturing's long position.

The idea behind Her Chee Industrial and Vietnam Manufacturing and 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.