Correlation Between Viet Nam and Mechanics Construction

Can any of the company-specific risk be diversified away by investing in both Viet Nam and Mechanics 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 Mechanics 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 Mechanics Construction and, you can compare the effects of market volatilities on Viet Nam and Mechanics 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 Mechanics Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Viet Nam and Mechanics Construction.

Diversification Opportunities for Viet Nam and Mechanics Construction

-0.27

Correlation Coefficient

Viet Nam  Mechanics Construction

Very good diversification

The 3 months correlation between Viet and Mechanics is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Viet Nam Construction and Mechanics Construction and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mechanics Construction 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 Mechanics Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mechanics Construction has no effect on the direction of Viet Nam i.e., Viet Nam and Mechanics Construction go up and down completely randomly.

Pair Corralation between Viet Nam and Mechanics Construction

Assuming the 90 days trading horizon Viet Nam Construction is expected to generate 3.6 times more return on investment than Mechanics Construction. However, Viet Nam is 3.6 times more volatile than Mechanics Construction and. It trades about 0.1 of its potential returns per unit of risk. Mechanics Construction and is currently generating about -0.04 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 Against
Strength	Insignificant
Accuracy	57.45%
Values	Daily Returns

Viet Nam Construction  vs.  Mechanics Construction and

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.

Mechanics Construction

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Viet Nam and Mechanics Construction

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

The idea behind Viet Nam Construction and Mechanics Construction and 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.