Correlation Between An Phat and Dong Nai

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

Diversification Opportunities for An Phat and Dong Nai

-0.3

Correlation Coefficient

An Phat  Dong Nai

Very good diversification

The 3 months correlation between AAA and Dong is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding An Phat Plastic and Dong Nai Plastic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dong Nai Plastic 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 Dong Nai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dong Nai Plastic has no effect on the direction of An Phat i.e., An Phat and Dong Nai go up and down completely randomly.

Pair Corralation between An Phat and Dong Nai

Assuming the 90 days trading horizon An Phat Plastic is expected to under-perform the Dong Nai. But the stock apears to be less risky and, when comparing its historical volatility, An Phat Plastic is 2.25 times less risky than Dong Nai. The stock trades about -0.05 of its potential returns per unit of risk. The Dong Nai Plastic is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  2,010,000  in Dong Nai Plastic on December 28, 2024 and sell it today you would lose (70,000) from holding Dong Nai Plastic or give up 3.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	77.59%
Values	Daily Returns

An Phat Plastic  vs.  Dong Nai Plastic

An Phat Plastic

Risk-Adjusted Performance

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 very healthy basic indicators, An Phat is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Dong Nai Plastic

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dong Nai Plastic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Dong Nai 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 Dong Nai

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

The idea behind An Phat Plastic and Dong Nai Plastic 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.

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.