Correlation Between South Basic and Pha Le

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

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

Diversification Opportunities for South Basic and Pha Le

0.08

Correlation Coefficient

South Basic  Pha Le

Significant diversification

The 3 months correlation between South and Pha is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding South Basic Chemicals 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 South Basic 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 South Basic Chemicals 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 South Basic i.e., South Basic and Pha Le go up and down completely randomly.

Pair Corralation between South Basic and Pha Le

Assuming the 90 days trading horizon South Basic Chemicals is expected to generate 0.97 times more return on investment than Pha Le. However, South Basic Chemicals is 1.03 times less risky than Pha Le. It trades about 0.35 of its potential returns per unit of risk. Pha Le Plastics is currently generating about 0.05 per unit of risk. If you would invest  3,655,000  in South Basic Chemicals on September 21, 2024 and sell it today you would earn a total of  645,000  from holding South Basic Chemicals or generate 17.65% return on investment over 90 days.

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

South Basic Chemicals  vs.  Pha Le Plastics

South Basic Chemicals

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in South Basic Chemicals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, South Basic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 South Basic and Pha Le

The main advantage of trading using opposite South Basic and Pha Le positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if South Basic 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 South Basic Chemicals 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.