Correlation Between Asia Commercial and Binh Duong

Can any of the company-specific risk be diversified away by investing in both Asia Commercial and Binh Duong 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 Asia Commercial and Binh Duong into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Asia Commercial Bank and Binh Duong Construction, you can compare the effects of market volatilities on Asia Commercial and Binh Duong 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 Asia Commercial with a short position of Binh Duong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asia Commercial and Binh Duong.

Diversification Opportunities for Asia Commercial and Binh Duong

-0.31

Correlation Coefficient

Asia Commercial  Binh Duong

Very good diversification

The 3 months correlation between Asia and Binh is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Asia Commercial Bank and Binh Duong Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Binh Duong Construction and Asia Commercial 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 Asia Commercial Bank are associated (or correlated) with Binh Duong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Binh Duong Construction has no effect on the direction of Asia Commercial i.e., Asia Commercial and Binh Duong go up and down completely randomly.

Pair Corralation between Asia Commercial and Binh Duong

Assuming the 90 days trading horizon Asia Commercial Bank is expected to under-perform the Binh Duong. But the stock apears to be less risky and, when comparing its historical volatility, Asia Commercial Bank is 1.03 times less risky than Binh Duong. The stock trades about -0.1 of its potential returns per unit of risk. The Binh Duong Construction is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  630,000  in Binh Duong Construction on September 15, 2024 and sell it today you would earn a total of  85,000  from holding Binh Duong Construction or generate 13.49% return on investment over 90 days.

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

Asia Commercial Bank  vs.  Binh Duong Construction

Asia Commercial Bank

Risk-Adjusted Performance

0 of 100

Very Weak

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

Binh Duong Construction

Risk-Adjusted Performance

22 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Binh Duong Construction are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Binh Duong displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Asia Commercial and Binh Duong

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

The idea behind Asia Commercial Bank and Binh Duong Construction 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.