Correlation Between Thanh Dat and Vietnam National

Can any of the company-specific risk be diversified away by investing in both Thanh Dat 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 Thanh Dat and Vietnam National 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 Vietnam National Reinsurance, you can compare the effects of market volatilities on Thanh Dat 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 Thanh Dat with a short position of Vietnam National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thanh Dat and Vietnam National.

Diversification Opportunities for Thanh Dat and Vietnam National

-0.22

Correlation Coefficient

Thanh Dat  Vietnam National

Very good diversification

The 3 months correlation between Thanh and Vietnam is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Thanh Dat Investment 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 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 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 Thanh Dat i.e., Thanh Dat and Vietnam National go up and down completely randomly.

Pair Corralation between Thanh Dat and Vietnam National

Assuming the 90 days trading horizon Thanh Dat Investment is expected to generate 2.65 times more return on investment than Vietnam National. However, Thanh Dat is 2.65 times more volatile than Vietnam National Reinsurance. It trades about 0.09 of its potential returns per unit of risk. Vietnam National Reinsurance is currently generating about -0.02 per unit of risk. If you would invest  2,400,000  in Thanh Dat Investment on September 15, 2024 and sell it today you would earn a total of  260,000  from holding Thanh Dat Investment or generate 10.83% return on investment over 90 days.

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

Thanh Dat Investment  vs.  Vietnam National Reinsurance

Thanh Dat Investment

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Thanh Dat Investment are ranked lower than 6 (%) 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.

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 Thanh Dat and Vietnam National

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

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.