Correlation Between Danang Rubber and Pha Lai

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

By analyzing existing cross correlation between Danang Rubber JSC and Pha Lai Thermal, you can compare the effects of market volatilities on Danang Rubber and Pha Lai 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 Danang Rubber with a short position of Pha Lai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Danang Rubber and Pha Lai.

Diversification Opportunities for Danang Rubber and Pha Lai

-0.07

Correlation Coefficient

Danang Rubber  Pha Lai

Good diversification

The 3 months correlation between Danang and Pha is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Danang Rubber JSC and Pha Lai Thermal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pha Lai Thermal and Danang Rubber 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 Danang Rubber JSC are associated (or correlated) with Pha Lai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pha Lai Thermal has no effect on the direction of Danang Rubber i.e., Danang Rubber and Pha Lai go up and down completely randomly.

Pair Corralation between Danang Rubber and Pha Lai

Assuming the 90 days trading horizon Danang Rubber JSC is expected to under-perform the Pha Lai. In addition to that, Danang Rubber is 1.17 times more volatile than Pha Lai Thermal. It trades about -0.23 of its total potential returns per unit of risk. Pha Lai Thermal is currently generating about 0.13 per unit of volatility. If you would invest  1,115,000  in Pha Lai Thermal on December 21, 2024 and sell it today you would earn a total of  70,000  from holding Pha Lai Thermal or generate 6.28% return on investment over 90 days.

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

Danang Rubber JSC  vs.  Pha Lai Thermal

Danang Rubber JSC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Danang Rubber JSC 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 fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pha Lai Thermal

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pha Lai Thermal are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Pha Lai may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Danang Rubber and Pha Lai

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

The idea behind Danang Rubber JSC and Pha Lai Thermal 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.