Correlation Between Thanh Dat and CMC Investment

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

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

Diversification Opportunities for Thanh Dat and CMC Investment

-0.74

Correlation Coefficient

Thanh Dat  CMC Investment

Pay attention - limited upside

The 3 months correlation between Thanh and CMC is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Thanh Dat 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 Thanh Dat 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 Thanh Dat 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 Thanh Dat i.e., Thanh Dat and CMC Investment go up and down completely randomly.

Pair Corralation between Thanh Dat and CMC Investment

Assuming the 90 days trading horizon Thanh Dat is expected to generate 3.2 times less return on investment than CMC Investment. But when comparing it to its historical volatility, Thanh Dat Investment is 2.38 times less risky than CMC Investment. It trades about 0.07 of its potential returns per unit of risk. CMC Investment JSC is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  550,000  in CMC Investment JSC on September 30, 2024 and sell it today you would earn a total of  30,000  from holding CMC Investment JSC or generate 5.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	71.43%
Values	Daily Returns

Thanh Dat Investment  vs.  CMC Investment JSC

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.

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 unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Thanh Dat and CMC Investment

The main advantage of trading using opposite Thanh Dat and CMC Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thanh Dat 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 Thanh Dat 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.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.