Correlation Between An Phat and Truong Thanh

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

Diversification Opportunities for An Phat and Truong Thanh

0.72

Correlation Coefficient

An Phat  Truong Thanh

Poor diversification

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

Pair Corralation between An Phat and Truong Thanh

Assuming the 90 days trading horizon An Phat Plastic is expected to under-perform the Truong Thanh. But the stock apears to be less risky and, when comparing its historical volatility, An Phat Plastic is 1.24 times less risky than Truong Thanh. The stock trades about -0.13 of its potential returns per unit of risk. The Truong Thanh Furniture is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  342,000  in Truong Thanh Furniture on September 14, 2024 and sell it today you would lose (32,000) from holding Truong Thanh Furniture or give up 9.36% of portfolio value over 90 days.

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

An Phat Plastic  vs.  Truong Thanh Furniture

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 latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Truong Thanh Furniture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Truong Thanh Furniture has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with An Phat and Truong Thanh

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

The idea behind An Phat Plastic and Truong Thanh Furniture 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.