Correlation Between Cotec Construction and Thanh Dat

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

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

Diversification Opportunities for Cotec Construction and Thanh Dat

0.61

Correlation Coefficient

Cotec Construction  Thanh Dat

Poor diversification

The 3 months correlation between Cotec and Thanh is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Cotec Construction JSC and Thanh Dat Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thanh Dat Investment and Cotec Construction 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 Cotec Construction JSC are associated (or correlated) with Thanh Dat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thanh Dat Investment has no effect on the direction of Cotec Construction i.e., Cotec Construction and Thanh Dat go up and down completely randomly.

Pair Corralation between Cotec Construction and Thanh Dat

Assuming the 90 days trading horizon Cotec Construction is expected to generate 1.05 times less return on investment than Thanh Dat. But when comparing it to its historical volatility, Cotec Construction JSC is 1.42 times less risky than Thanh Dat. It trades about 0.09 of its potential returns per unit of risk. Thanh Dat Investment is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,530,000  in Thanh Dat Investment on September 29, 2024 and sell it today you would earn a total of  210,000  from holding Thanh Dat Investment or generate 8.3% return on investment over 90 days.

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

Cotec Construction JSC  vs.  Thanh Dat Investment

Cotec Construction JSC

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cotec Construction JSC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Cotec Construction may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Thanh Dat Investment

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Thanh Dat Investment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Thanh Dat may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Cotec Construction and Thanh Dat

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

The idea behind Cotec Construction JSC and Thanh Dat Investment 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.