Correlation Between An Phat and Saigon Machinery

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

Diversification Opportunities for An Phat and Saigon Machinery

-0.66

Correlation Coefficient

An Phat  Saigon Machinery

Excellent diversification

The 3 months correlation between AAA and Saigon is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding An Phat Plastic and Saigon Machinery Spare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saigon Machinery Spare 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 Saigon Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saigon Machinery Spare has no effect on the direction of An Phat i.e., An Phat and Saigon Machinery go up and down completely randomly.

Pair Corralation between An Phat and Saigon Machinery

Assuming the 90 days trading horizon An Phat is expected to generate 12.98 times less return on investment than Saigon Machinery. But when comparing it to its historical volatility, An Phat Plastic is 2.7 times less risky than Saigon Machinery. It trades about 0.18 of its potential returns per unit of risk. Saigon Machinery Spare is currently generating about 0.87 of returns per unit of risk over similar time horizon. If you would invest  1,015,000  in Saigon Machinery Spare on September 20, 2024 and sell it today you would earn a total of  125,000  from holding Saigon Machinery Spare or generate 12.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	22.73%
Values	Daily Returns

An Phat Plastic  vs.  Saigon Machinery Spare

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.

Saigon Machinery Spare

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Saigon Machinery Spare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very unfluctuating basic indicators, Saigon Machinery displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with An Phat and Saigon Machinery

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

The idea behind An Phat Plastic and Saigon Machinery Spare 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.