Correlation Between Bich Chi and Pha Le

Can any of the company-specific risk be diversified away by investing in both Bich Chi and Pha Le 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 Bich Chi and Pha Le into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bich Chi Food and Pha Le Plastics, you can compare the effects of market volatilities on Bich Chi and Pha Le 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 Bich Chi with a short position of Pha Le. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bich Chi and Pha Le.

Diversification Opportunities for Bich Chi and Pha Le

-0.6

Correlation Coefficient

Bich Chi  Pha Le

Excellent diversification

The 3 months correlation between Bich and Pha is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Bich Chi Food and Pha Le Plastics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pha Le Plastics and Bich Chi 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 Bich Chi Food are associated (or correlated) with Pha Le. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pha Le Plastics has no effect on the direction of Bich Chi i.e., Bich Chi and Pha Le go up and down completely randomly.

Pair Corralation between Bich Chi and Pha Le

Assuming the 90 days trading horizon Bich Chi Food is expected to generate 1.16 times more return on investment than Pha Le. However, Bich Chi is 1.16 times more volatile than Pha Le Plastics. It trades about 0.16 of its potential returns per unit of risk. Pha Le Plastics is currently generating about -0.09 per unit of risk. If you would invest  3,900,000  in Bich Chi Food on September 23, 2024 and sell it today you would earn a total of  200,000  from holding Bich Chi Food or generate 5.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	59.09%
Values	Daily Returns

Bich Chi Food  vs.  Pha Le Plastics

Bich Chi Food

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bich Chi Food are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Bich Chi displayed solid returns over the last few months and may actually be approaching a breakup point.

Pha Le Plastics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pha Le Plastics 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.

Pair Trading with Bich Chi and Pha Le

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

The idea behind Bich Chi Food and Pha Le Plastics 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.