Correlation Between Transimex Transportation and Saigon Machinery

Can any of the company-specific risk be diversified away by investing in both Transimex Transportation and Saigon Machinery 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 Transimex Transportation and Saigon Machinery into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Transimex Transportation JSC and Saigon Machinery Spare, you can compare the effects of market volatilities on Transimex Transportation and Saigon Machinery 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 Transimex Transportation with a short position of Saigon Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transimex Transportation and Saigon Machinery.

Diversification Opportunities for Transimex Transportation and Saigon Machinery

-0.54

Correlation Coefficient

Transimex Transportation  Saigon Machinery

Excellent diversification

The 3 months correlation between Transimex and Saigon is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Transimex Transportation JSC and Saigon Machinery Spare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saigon Machinery Spare and Transimex Transportation 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 Transimex Transportation JSC are associated (or correlated) with Saigon Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saigon Machinery Spare has no effect on the direction of Transimex Transportation i.e., Transimex Transportation and Saigon Machinery go up and down completely randomly.

Pair Corralation between Transimex Transportation and Saigon Machinery

Assuming the 90 days trading horizon Transimex Transportation JSC is expected to under-perform the Saigon Machinery. But the stock apears to be less risky and, when comparing its historical volatility, Transimex Transportation JSC is 2.55 times less risky than Saigon Machinery. The stock trades about -0.02 of its potential returns per unit of risk. The Saigon Machinery Spare is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,070,000  in Saigon Machinery Spare on September 23, 2024 and sell it today you would earn a total of  70,000  from holding Saigon Machinery Spare or generate 6.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	34.15%
Values	Daily Returns

Transimex Transportation JSC  vs.  Saigon Machinery Spare

Transimex Transportation

Risk-Adjusted Performance

0 of 100

Very Weak

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

Saigon Machinery Spare

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Saigon Machinery Spare are ranked lower than 9 (%) 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.

Pair Trading with Transimex Transportation and Saigon Machinery

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

The idea behind Transimex Transportation JSC and Saigon Machinery Spare 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.