Correlation Between VINACONEX and South Basic

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

By analyzing existing cross correlation between VINACONEX 21 and South Basic Chemicals, you can compare the effects of market volatilities on VINACONEX and South Basic 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 VINACONEX with a short position of South Basic. Check out your portfolio center. Please also check ongoing floating volatility patterns of VINACONEX and South Basic.

Diversification Opportunities for VINACONEX and South Basic

0.81

Correlation Coefficient

VINACONEX  South Basic

Very poor diversification

The 3 months correlation between VINACONEX and South is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding VINACONEX 21 and South Basic Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South Basic Chemicals and VINACONEX 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 VINACONEX 21 are associated (or correlated) with South Basic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South Basic Chemicals has no effect on the direction of VINACONEX i.e., VINACONEX and South Basic go up and down completely randomly.

Pair Corralation between VINACONEX and South Basic

Assuming the 90 days trading horizon VINACONEX is expected to generate 1.07 times less return on investment than South Basic. In addition to that, VINACONEX is 1.26 times more volatile than South Basic Chemicals. It trades about 0.09 of its total potential returns per unit of risk. South Basic Chemicals is currently generating about 0.12 per unit of volatility. If you would invest  3,865,000  in South Basic Chemicals on September 29, 2024 and sell it today you would earn a total of  750,000  from holding South Basic Chemicals or generate 19.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	90.77%
Values	Daily Returns

VINACONEX 21  vs.  South Basic Chemicals

VINACONEX 21

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VINACONEX 21 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, VINACONEX displayed solid returns over the last few months and may actually be approaching a breakup point.

South Basic Chemicals

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in South Basic Chemicals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, South Basic displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VINACONEX and South Basic

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

The idea behind VINACONEX 21 and South Basic Chemicals 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.