Correlation Between Vu Dang and CMC Investment

Can any of the company-specific risk be diversified away by investing in both Vu Dang 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 Vu Dang and CMC Investment 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 CMC Investment JSC, you can compare the effects of market volatilities on Vu Dang 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 Vu Dang with a short position of CMC Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vu Dang and CMC Investment.

Diversification Opportunities for Vu Dang and CMC Investment

-0.23

Correlation Coefficient

Vu Dang  CMC Investment

Very good diversification

The 3 months correlation between SVD and CMC is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Vu Dang Investment 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 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 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 Vu Dang i.e., Vu Dang and CMC Investment go up and down completely randomly.

Pair Corralation between Vu Dang and CMC Investment

Assuming the 90 days trading horizon Vu Dang Investment is expected to generate 0.53 times more return on investment than CMC Investment. However, Vu Dang Investment is 1.88 times less risky than CMC Investment. It trades about -0.01 of its potential returns per unit of risk. CMC Investment JSC is currently generating about -0.01 per unit of risk. If you would invest  330,000  in Vu Dang Investment on September 28, 2024 and sell it today you would lose (9,000) from holding Vu Dang Investment or give up 2.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	59.38%
Values	Daily Returns

Vu Dang Investment  vs.  CMC Investment JSC

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.

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 very healthy fundamental indicators, CMC Investment is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vu Dang and CMC Investment

The main advantage of trading using opposite Vu Dang and CMC Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vu Dang 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 Vu Dang Investment 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.