Can any of the company-specific risk be diversified away by investing in both VinFast Auto and China Merchants 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 VinFast Auto and China Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VinFast Auto Ltd and China Merchants Bank, you can compare the effects of market volatilities on VinFast Auto and China Merchants 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 VinFast Auto with a short position of China Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of VinFast Auto and China Merchants.
Diversification Opportunities for VinFast Auto and China Merchants
The 3 months correlation between VinFast and China is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding VinFast Auto Ltd and China Merchants Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Merchants Bank and VinFast Auto 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 VinFast Auto Ltd are associated (or correlated) with China Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Merchants Bank has no effect on the direction of VinFast Auto i.e., VinFast Auto and China Merchants go up and down completely randomly.
Pair Corralation between VinFast Auto and China Merchants
Considering the 90-day investment horizon VinFast Auto Ltd is expected to generate 5.83 times more return on investment than China Merchants. However, VinFast Auto is 5.83 times more volatile than China Merchants Bank. It trades about 0.21 of its potential returns per unit of risk. China Merchants Bank is currently generating about -0.06 per unit of risk. If you would invest 308.00 in VinFast Auto Ltd on March 6, 2024 and sell it today you would earn a total of 179.00 from holding VinFast Auto Ltd or generate 58.12% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in VinFast Auto Ltd are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical and fundamental indicators, VinFast Auto unveiled solid returns over the last few months and may actually be approaching a breakup point.
Compared to the overall equity markets, risk-adjusted returns on investments in China Merchants Bank are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking signals, China Merchants showed solid returns over the last few months and may actually be approaching a breakup point.