Correlation Between SMC Investment and Viettel Construction

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

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

Diversification Opportunities for SMC Investment and Viettel Construction

0.02

Correlation Coefficient

SMC Investment  Viettel Construction

Significant diversification

The 3 months correlation between SMC and Viettel is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding SMC Investment Trading and Viettel Construction JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viettel Construction JSC and SMC 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 SMC Investment Trading are associated (or correlated) with Viettel Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viettel Construction JSC has no effect on the direction of SMC Investment i.e., SMC Investment and Viettel Construction go up and down completely randomly.

Pair Corralation between SMC Investment and Viettel Construction

Assuming the 90 days trading horizon SMC Investment Trading is expected to generate 1.63 times more return on investment than Viettel Construction. However, SMC Investment is 1.63 times more volatile than Viettel Construction JSC. It trades about 0.04 of its potential returns per unit of risk. Viettel Construction JSC is currently generating about -0.01 per unit of risk. If you would invest  765,000  in SMC Investment Trading on September 23, 2024 and sell it today you would earn a total of  39,000  from holding SMC Investment Trading or generate 5.1% return on investment over 90 days.

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

SMC Investment Trading  vs.  Viettel Construction JSC

SMC Investment Trading

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SMC Investment Trading are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, SMC Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Viettel Construction JSC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with SMC Investment and Viettel Construction

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

The idea behind SMC Investment Trading and Viettel Construction 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.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.