Correlation Between Saigon Machinery and CMC Investment

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

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

Diversification Opportunities for Saigon Machinery and CMC Investment

-0.54

Correlation Coefficient

Saigon Machinery  CMC Investment

Excellent diversification

The 3 months correlation between Saigon and CMC is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Saigon Machinery Spare 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 Saigon Machinery 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 Saigon Machinery Spare 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 Saigon Machinery i.e., Saigon Machinery and CMC Investment go up and down completely randomly.

Pair Corralation between Saigon Machinery and CMC Investment

Assuming the 90 days trading horizon Saigon Machinery Spare is expected to generate 0.99 times more return on investment than CMC Investment. However, Saigon Machinery Spare is 1.01 times less risky than CMC Investment. It trades about 0.35 of its potential returns per unit of risk. CMC Investment JSC is currently generating about -0.05 per unit of risk. If you would invest  1,070,000  in Saigon Machinery Spare on September 29, 2024 and sell it today you would earn a total of  310,000  from holding Saigon Machinery Spare or generate 28.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	43.59%
Values	Daily Returns

Saigon Machinery Spare  vs.  CMC Investment JSC

Saigon Machinery Spare

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Saigon Machinery Spare are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Saigon Machinery displayed solid returns over the last few months and may actually be approaching a breakup point.

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 Saigon Machinery and CMC Investment

The main advantage of trading using opposite Saigon Machinery and CMC Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Saigon Machinery 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 Saigon Machinery Spare 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.