Correlation Between Viet Nam and Construction

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

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

Diversification Opportunities for Viet Nam and Construction

0.24

Correlation Coefficient

Viet Nam  Construction

Modest diversification

The 3 months correlation between Viet and Construction is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Viet Nam Construction and Construction And Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Construction And Inv and Viet Nam 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 Viet Nam Construction are associated (or correlated) with Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Construction And Inv has no effect on the direction of Viet Nam i.e., Viet Nam and Construction go up and down completely randomly.

Pair Corralation between Viet Nam and Construction

Assuming the 90 days trading horizon Viet Nam Construction is expected to generate 2.77 times more return on investment than Construction. However, Viet Nam is 2.77 times more volatile than Construction And Investment. It trades about 0.1 of its potential returns per unit of risk. Construction And Investment is currently generating about 0.11 per unit of risk. If you would invest  1,120,000  in Viet Nam Construction on September 29, 2024 and sell it today you would earn a total of  100,000  from holding Viet Nam Construction or generate 8.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	41.54%
Values	Daily Returns

Viet Nam Construction  vs.  Construction And Investment

Viet Nam Construction

Risk-Adjusted Performance

7 of 100

OK

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

Construction And Inv

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Construction And Investment are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Construction may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Viet Nam and Construction

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

The idea behind Viet Nam Construction and Construction And 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.

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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.