Correlation Between Ben Thanh and Phuoc Hoa

Can any of the company-specific risk be diversified away by investing in both Ben Thanh and Phuoc Hoa 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 Ben Thanh and Phuoc Hoa into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ben Thanh Rubber and Phuoc Hoa Rubber, you can compare the effects of market volatilities on Ben Thanh and Phuoc Hoa 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 Ben Thanh with a short position of Phuoc Hoa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ben Thanh and Phuoc Hoa.

Diversification Opportunities for Ben Thanh and Phuoc Hoa

0.04

Correlation Coefficient

Ben Thanh  Phuoc Hoa

Significant diversification

The 3 months correlation between Ben and Phuoc is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Ben Thanh Rubber and Phuoc Hoa Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phuoc Hoa Rubber and Ben Thanh 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 Ben Thanh Rubber are associated (or correlated) with Phuoc Hoa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phuoc Hoa Rubber has no effect on the direction of Ben Thanh i.e., Ben Thanh and Phuoc Hoa go up and down completely randomly.

Pair Corralation between Ben Thanh and Phuoc Hoa

Assuming the 90 days trading horizon Ben Thanh Rubber is expected to generate 1.15 times more return on investment than Phuoc Hoa. However, Ben Thanh is 1.15 times more volatile than Phuoc Hoa Rubber. It trades about 0.07 of its potential returns per unit of risk. Phuoc Hoa Rubber is currently generating about 0.04 per unit of risk. If you would invest  776,921  in Ben Thanh Rubber on October 12, 2024 and sell it today you would earn a total of  663,079  from holding Ben Thanh Rubber or generate 85.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.13%
Values	Daily Returns

Ben Thanh Rubber  vs.  Phuoc Hoa Rubber

Ben Thanh Rubber

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ben Thanh Rubber are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Ben Thanh may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Phuoc Hoa Rubber

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Phuoc Hoa Rubber has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak 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 Ben Thanh and Phuoc Hoa

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

The idea behind Ben Thanh Rubber and Phuoc Hoa Rubber 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.