Correlation Between Tin Nghia and Viet Thanh

Can any of the company-specific risk be diversified away by investing in both Tin Nghia and Viet Thanh 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 Tin Nghia and Viet Thanh into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tin Nghia Industrial and Viet Thanh Plastic, you can compare the effects of market volatilities on Tin Nghia and Viet Thanh 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 Tin Nghia with a short position of Viet Thanh. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tin Nghia and Viet Thanh.

Diversification Opportunities for Tin Nghia and Viet Thanh

-0.09

Correlation Coefficient

Tin Nghia  Viet Thanh

Good diversification

The 3 months correlation between Tin and Viet is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Tin Nghia Industrial and Viet Thanh Plastic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viet Thanh Plastic and Tin Nghia 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 Tin Nghia Industrial are associated (or correlated) with Viet Thanh. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viet Thanh Plastic has no effect on the direction of Tin Nghia i.e., Tin Nghia and Viet Thanh go up and down completely randomly.

Pair Corralation between Tin Nghia and Viet Thanh

Assuming the 90 days trading horizon Tin Nghia Industrial is expected to under-perform the Viet Thanh. But the stock apears to be less risky and, when comparing its historical volatility, Tin Nghia Industrial is 1.81 times less risky than Viet Thanh. The stock trades about -0.01 of its potential returns per unit of risk. The Viet Thanh Plastic is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,500,000  in Viet Thanh Plastic on September 16, 2024 and sell it today you would earn a total of  230,000  from holding Viet Thanh Plastic or generate 15.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.48%
Values	Daily Returns

Tin Nghia Industrial  vs.  Viet Thanh Plastic

Tin Nghia Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Viet Thanh Plastic

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Viet Thanh Plastic are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Viet Thanh displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tin Nghia and Viet Thanh

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

The idea behind Tin Nghia Industrial and Viet Thanh Plastic 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 Transaction History module to view history of all your transactions and understand their impact on performance.