Correlation Between Saigon Machinery and Danh Khoi

Can any of the company-specific risk be diversified away by investing in both Saigon Machinery and Danh Khoi 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 Danh Khoi 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 Danh Khoi Group, you can compare the effects of market volatilities on Saigon Machinery and Danh Khoi 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 Danh Khoi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Saigon Machinery and Danh Khoi.

Diversification Opportunities for Saigon Machinery and Danh Khoi

0.65

Correlation Coefficient

Saigon Machinery  Danh Khoi

Poor diversification

The 3 months correlation between Saigon and Danh is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Saigon Machinery Spare and Danh Khoi Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danh Khoi Group 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 Danh Khoi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danh Khoi Group has no effect on the direction of Saigon Machinery i.e., Saigon Machinery and Danh Khoi go up and down completely randomly.

Pair Corralation between Saigon Machinery and Danh Khoi

Assuming the 90 days trading horizon Saigon Machinery Spare is expected to generate 1.15 times more return on investment than Danh Khoi. However, Saigon Machinery is 1.15 times more volatile than Danh Khoi Group. It trades about 0.35 of its potential returns per unit of risk. Danh Khoi Group is currently generating about 0.22 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 Together
Strength	Significant
Accuracy	26.15%
Values	Daily Returns

Saigon Machinery Spare  vs.  Danh Khoi Group

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.

Danh Khoi Group

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Danh Khoi Group are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Danh Khoi displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Saigon Machinery and Danh Khoi

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

The idea behind Saigon Machinery Spare and Danh Khoi Group 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.