Correlation Between Bao Ngoc and CMC Investment

Can any of the company-specific risk be diversified away by investing in both Bao Ngoc and CMC Investment 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 Bao Ngoc and CMC Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bao Ngoc Investment and CMC Investment JSC, you can compare the effects of market volatilities on Bao Ngoc and CMC Investment 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 Bao Ngoc with a short position of CMC Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bao Ngoc and CMC Investment.

Diversification Opportunities for Bao Ngoc and CMC Investment

-0.35

Correlation Coefficient

Bao Ngoc  CMC Investment

Very good diversification

The 3 months correlation between Bao and CMC is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Bao Ngoc Investment and CMC Investment JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMC Investment JSC and Bao Ngoc 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 Bao Ngoc Investment are associated (or correlated) with CMC Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CMC Investment JSC has no effect on the direction of Bao Ngoc i.e., Bao Ngoc and CMC Investment go up and down completely randomly.

Pair Corralation between Bao Ngoc and CMC Investment

Assuming the 90 days trading horizon Bao Ngoc Investment is expected to generate 0.49 times more return on investment than CMC Investment. However, Bao Ngoc Investment is 2.04 times less risky than CMC Investment. It trades about 0.1 of its potential returns per unit of risk. CMC Investment JSC is currently generating about -0.01 per unit of risk. If you would invest  936,000  in Bao Ngoc Investment on September 28, 2024 and sell it today you would earn a total of  124,000  from holding Bao Ngoc Investment or generate 13.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	59.38%
Values	Daily Returns

Bao Ngoc Investment  vs.  CMC Investment JSC

Bao Ngoc Investment

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bao Ngoc Investment are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Bao Ngoc displayed solid returns over the last few months and may actually be approaching a breakup point.

CMC Investment JSC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Bao Ngoc and CMC Investment

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

The idea behind Bao Ngoc Investment and CMC Investment JSC 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.