Correlation Between BaoMinh Insurance and Tien Phong

Can any of the company-specific risk be diversified away by investing in both BaoMinh Insurance and Tien Phong 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 BaoMinh Insurance and Tien Phong into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BaoMinh Insurance Corp and Tien Phong Plastic, you can compare the effects of market volatilities on BaoMinh Insurance and Tien Phong 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 BaoMinh Insurance with a short position of Tien Phong. Check out your portfolio center. Please also check ongoing floating volatility patterns of BaoMinh Insurance and Tien Phong.

Diversification Opportunities for BaoMinh Insurance and Tien Phong

0.69

Correlation Coefficient

BaoMinh Insurance  Tien Phong

Poor diversification

The 3 months correlation between BaoMinh and Tien is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding BaoMinh Insurance Corp and Tien Phong Plastic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tien Phong Plastic and BaoMinh Insurance 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 BaoMinh Insurance Corp are associated (or correlated) with Tien Phong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tien Phong Plastic has no effect on the direction of BaoMinh Insurance i.e., BaoMinh Insurance and Tien Phong go up and down completely randomly.

Pair Corralation between BaoMinh Insurance and Tien Phong

Assuming the 90 days trading horizon BaoMinh Insurance Corp is expected to under-perform the Tien Phong. But the stock apears to be less risky and, when comparing its historical volatility, BaoMinh Insurance Corp is 1.14 times less risky than Tien Phong. The stock trades about -0.05 of its potential returns per unit of risk. The Tien Phong Plastic is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  7,000,000  in Tien Phong Plastic on September 15, 2024 and sell it today you would lose (410,000) from holding Tien Phong Plastic or give up 5.86% of portfolio value over 90 days.

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

BaoMinh Insurance Corp  vs.  Tien Phong Plastic

BaoMinh Insurance Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Tien Phong Plastic

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with BaoMinh Insurance and Tien Phong

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

The idea behind BaoMinh Insurance Corp and Tien Phong Plastic 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..