Correlation Between Sao Ta and Pha Le

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

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

Diversification Opportunities for Sao Ta and Pha Le

-0.09

Correlation Coefficient

Sao Ta  Pha Le

Good diversification

The 3 months correlation between Sao and Pha is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Sao Ta Foods 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 Sao Ta 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 Sao Ta Foods 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 Sao Ta i.e., Sao Ta and Pha Le go up and down completely randomly.

Pair Corralation between Sao Ta and Pha Le

Assuming the 90 days trading horizon Sao Ta is expected to generate 17.34 times less return on investment than Pha Le. But when comparing it to its historical volatility, Sao Ta Foods is 1.63 times less risky than Pha Le. It trades about 0.01 of its potential returns per unit of risk. Pha Le Plastics is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  445,000  in Pha Le Plastics on December 27, 2024 and sell it today you would earn a total of  51,000  from holding Pha Le Plastics or generate 11.46% return on investment over 90 days.

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

Sao Ta Foods  vs.  Pha Le Plastics

Sao Ta Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sao Ta Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Sao Ta is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pha Le Plastics

Risk-Adjusted Performance

OK

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

Pair Trading with Sao Ta and Pha Le

The main advantage of trading using opposite Sao Ta and Pha Le positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sao Ta 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 Sao Ta Foods 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.