Correlation Between Nafoods Group and Vietnam Dairy

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

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

Diversification Opportunities for Nafoods Group and Vietnam Dairy

0.15

Correlation Coefficient

Nafoods Group  Vietnam Dairy

Average diversification

The 3 months correlation between Nafoods and Vietnam is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Nafoods Group JSC and Vietnam Dairy Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vietnam Dairy Products and Nafoods Group 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 Nafoods Group JSC are associated (or correlated) with Vietnam Dairy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vietnam Dairy Products has no effect on the direction of Nafoods Group i.e., Nafoods Group and Vietnam Dairy go up and down completely randomly.

Pair Corralation between Nafoods Group and Vietnam Dairy

Assuming the 90 days trading horizon Nafoods Group JSC is expected to generate 2.15 times more return on investment than Vietnam Dairy. However, Nafoods Group is 2.15 times more volatile than Vietnam Dairy Products. It trades about 0.03 of its potential returns per unit of risk. Vietnam Dairy Products is currently generating about -0.03 per unit of risk. If you would invest  1,955,000  in Nafoods Group JSC on September 15, 2024 and sell it today you would earn a total of  15,000  from holding Nafoods Group JSC or generate 0.77% return on investment over 90 days.

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

Nafoods Group JSC  vs.  Vietnam Dairy Products

Nafoods Group JSC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nafoods Group JSC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Nafoods Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Vietnam Dairy Products

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vietnam Dairy Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Nafoods Group and Vietnam Dairy

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

The idea behind Nafoods Group JSC and Vietnam Dairy Products 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.