Correlation Between LDG Investment and BaoMinh Insurance

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

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

Diversification Opportunities for LDG Investment and BaoMinh Insurance

-0.27

Correlation Coefficient

LDG Investment  BaoMinh Insurance

Very good diversification

The 3 months correlation between LDG and BaoMinh is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding LDG Investment JSC and BaoMinh Insurance Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BaoMinh Insurance Corp and LDG 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 LDG Investment JSC are associated (or correlated) with BaoMinh Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BaoMinh Insurance Corp has no effect on the direction of LDG Investment i.e., LDG Investment and BaoMinh Insurance go up and down completely randomly.

Pair Corralation between LDG Investment and BaoMinh Insurance

Assuming the 90 days trading horizon LDG Investment JSC is expected to under-perform the BaoMinh Insurance. In addition to that, LDG Investment is 1.14 times more volatile than BaoMinh Insurance Corp. It trades about -0.11 of its total potential returns per unit of risk. BaoMinh Insurance Corp is currently generating about -0.02 per unit of volatility. If you would invest  2,150,000  in BaoMinh Insurance Corp on September 5, 2024 and sell it today you would lose (35,000) from holding BaoMinh Insurance Corp or give up 1.63% of portfolio value over 90 days.

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

LDG Investment JSC  vs.  BaoMinh Insurance Corp

LDG Investment JSC

Risk-Adjusted Performance

0 of 100

Very Weak

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

BaoMinh Insurance Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with LDG Investment and BaoMinh Insurance

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

The idea behind LDG Investment JSC and BaoMinh Insurance Corp 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.