Correlation Between Vu Dang and Bao Ngoc

Can any of the company-specific risk be diversified away by investing in both Vu Dang and Bao Ngoc 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 Vu Dang and Bao Ngoc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vu Dang Investment and Bao Ngoc Investment, you can compare the effects of market volatilities on Vu Dang and Bao Ngoc 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 Vu Dang with a short position of Bao Ngoc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vu Dang and Bao Ngoc.

Diversification Opportunities for Vu Dang and Bao Ngoc

0.16

Correlation Coefficient

Vu Dang  Bao Ngoc

Average diversification

The 3 months correlation between SVD and Bao is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Vu Dang Investment and Bao Ngoc Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bao Ngoc Investment and Vu Dang 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 Vu Dang Investment are associated (or correlated) with Bao Ngoc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bao Ngoc Investment has no effect on the direction of Vu Dang i.e., Vu Dang and Bao Ngoc go up and down completely randomly.

Pair Corralation between Vu Dang and Bao Ngoc

Assuming the 90 days trading horizon Vu Dang Investment is expected to under-perform the Bao Ngoc. In addition to that, Vu Dang is 1.12 times more volatile than Bao Ngoc Investment. It trades about -0.11 of its total potential returns per unit of risk. Bao Ngoc Investment is currently generating about 0.18 per unit of volatility. If you would invest  970,000  in Bao Ngoc Investment on September 28, 2024 and sell it today you would earn a total of  90,000  from holding Bao Ngoc Investment or generate 9.28% return on investment over 90 days.

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

Vu Dang Investment  vs.  Bao Ngoc Investment

Vu Dang Investment

Risk-Adjusted Performance

0 of 100

Very Weak

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

Bao Ngoc Investment

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bao Ngoc Investment are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Bao Ngoc displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vu Dang and Bao Ngoc

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

The idea behind Vu Dang Investment and Bao Ngoc Investment 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.