Correlation Between An Phat and Cotec Construction

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

By analyzing existing cross correlation between An Phat Plastic and Cotec Construction JSC, you can compare the effects of market volatilities on An Phat and Cotec 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 An Phat with a short position of Cotec Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of An Phat and Cotec Construction.

Diversification Opportunities for An Phat and Cotec Construction

-0.72

Correlation Coefficient

An Phat  Cotec Construction

Pay attention - limited upside

The 3 months correlation between AAA and Cotec is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding An Phat Plastic and Cotec Construction JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cotec Construction JSC and An Phat 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 An Phat Plastic are associated (or correlated) with Cotec Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cotec Construction JSC has no effect on the direction of An Phat i.e., An Phat and Cotec Construction go up and down completely randomly.

Pair Corralation between An Phat and Cotec Construction

Assuming the 90 days trading horizon An Phat Plastic is expected to under-perform the Cotec Construction. But the stock apears to be less risky and, when comparing its historical volatility, An Phat Plastic is 1.46 times less risky than Cotec Construction. The stock trades about -0.21 of its potential returns per unit of risk. The Cotec Construction JSC is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  6,370,000  in Cotec Construction JSC on September 4, 2024 and sell it today you would earn a total of  330,000  from holding Cotec Construction JSC or generate 5.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

An Phat Plastic  vs.  Cotec Construction JSC

An Phat Plastic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days An Phat Plastic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Cotec Construction JSC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cotec Construction JSC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Cotec 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 An Phat and Cotec Construction

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

The idea behind An Phat Plastic and Cotec Construction JSC 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.