Correlation Between Binh Duong and Hai An

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

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

Diversification Opportunities for Binh Duong and Hai An

0.91

Correlation Coefficient

Binh Duong  Hai An

Almost no diversification

The 3 months correlation between Binh and Hai is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Binh Duong Construction and Hai An Transport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hai An Transport and Binh Duong 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 Binh Duong Construction are associated (or correlated) with Hai An. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hai An Transport has no effect on the direction of Binh Duong i.e., Binh Duong and Hai An go up and down completely randomly.

Pair Corralation between Binh Duong and Hai An

Assuming the 90 days trading horizon Binh Duong is expected to generate 2.01 times less return on investment than Hai An. But when comparing it to its historical volatility, Binh Duong Construction is 1.64 times less risky than Hai An. It trades about 0.08 of its potential returns per unit of risk. Hai An Transport is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,947,826  in Hai An Transport on September 14, 2024 and sell it today you would earn a total of  1,992,174  from holding Hai An Transport or generate 67.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.63%
Values	Daily Returns

Binh Duong Construction  vs.  Hai An Transport

Binh Duong Construction

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Binh Duong Construction are ranked lower than 26 (%) 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.

Hai An Transport

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hai An Transport are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical indicators, Hai An displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Binh Duong and Hai An

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

The idea behind Binh Duong Construction and Hai An Transport 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.