Correlation Between Ben Thanh and Vietnam National

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

By analyzing existing cross correlation between Ben Thanh Rubber and Vietnam National Reinsurance, you can compare the effects of market volatilities on Ben Thanh and Vietnam National 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 Ben Thanh with a short position of Vietnam National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ben Thanh and Vietnam National.

Diversification Opportunities for Ben Thanh and Vietnam National

-0.56

Correlation Coefficient

Ben Thanh  Vietnam National

Excellent diversification

The 3 months correlation between Ben and Vietnam is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Ben Thanh Rubber and Vietnam National Reinsurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vietnam National Rei and Ben Thanh 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 Ben Thanh Rubber are associated (or correlated) with Vietnam National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vietnam National Rei has no effect on the direction of Ben Thanh i.e., Ben Thanh and Vietnam National go up and down completely randomly.

Pair Corralation between Ben Thanh and Vietnam National

Assuming the 90 days trading horizon Ben Thanh is expected to generate 6.64 times less return on investment than Vietnam National. But when comparing it to its historical volatility, Ben Thanh Rubber is 2.4 times less risky than Vietnam National. It trades about 0.08 of its potential returns per unit of risk. Vietnam National Reinsurance is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  2,063,636  in Vietnam National Reinsurance on September 16, 2024 and sell it today you would earn a total of  96,364  from holding Vietnam National Reinsurance or generate 4.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Ben Thanh Rubber  vs.  Vietnam National Reinsurance

Ben Thanh Rubber

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ben Thanh Rubber are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Ben Thanh may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Vietnam National Rei

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ben Thanh and Vietnam National

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

The idea behind Ben Thanh Rubber and Vietnam National Reinsurance 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.