Correlation Between FPT Corp and Pha Le

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

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

Diversification Opportunities for FPT Corp and Pha Le

-0.27

Correlation Coefficient

FPT Corp  Pha Le

Very good diversification

The 3 months correlation between FPT and Pha is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding FPT Corp 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 FPT Corp 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 FPT Corp 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 FPT Corp i.e., FPT Corp and Pha Le go up and down completely randomly.

Pair Corralation between FPT Corp and Pha Le

Assuming the 90 days trading horizon FPT Corp is expected to generate 0.77 times more return on investment than Pha Le. However, FPT Corp is 1.31 times less risky than Pha Le. It trades about 0.12 of its potential returns per unit of risk. Pha Le Plastics is currently generating about 0.02 per unit of risk. If you would invest  6,567,191  in FPT Corp on October 4, 2024 and sell it today you would earn a total of  8,682,809  from holding FPT Corp or generate 132.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

FPT Corp  vs.  Pha Le Plastics

FPT Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FPT Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, FPT Corp 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 very healthy basic indicators, Pha Le is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with FPT Corp and Pha Le

The main advantage of trading using opposite FPT Corp and Pha Le positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FPT Corp 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 FPT Corp 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.