Correlation Between CMC Investment and Vietnam Airlines

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

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

Diversification Opportunities for CMC Investment and Vietnam Airlines

-0.78

Correlation Coefficient

CMC Investment  Vietnam Airlines

Pay attention - limited upside

The 3 months correlation between CMC and Vietnam is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding CMC Investment JSC and Vietnam Airlines JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vietnam Airlines JSC and CMC Investment 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 CMC Investment JSC are associated (or correlated) with Vietnam Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vietnam Airlines JSC has no effect on the direction of CMC Investment i.e., CMC Investment and Vietnam Airlines go up and down completely randomly.

Pair Corralation between CMC Investment and Vietnam Airlines

Assuming the 90 days trading horizon CMC Investment JSC is expected to under-perform the Vietnam Airlines. In addition to that, CMC Investment is 1.78 times more volatile than Vietnam Airlines JSC. It trades about -0.01 of its total potential returns per unit of risk. Vietnam Airlines JSC is currently generating about 0.21 per unit of volatility. If you would invest  2,105,000  in Vietnam Airlines JSC on September 28, 2024 and sell it today you would earn a total of  795,000  from holding Vietnam Airlines JSC or generate 37.77% return on investment over 90 days.

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

CMC Investment JSC  vs.  Vietnam Airlines JSC

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.

Vietnam Airlines JSC

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vietnam Airlines JSC are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Vietnam Airlines displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CMC Investment and Vietnam Airlines

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

The idea behind CMC Investment JSC and Vietnam Airlines 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.