Correlation Between Ha Long and Pha Lai

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

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

Diversification Opportunities for Ha Long and Pha Lai

0.82

Correlation Coefficient

Ha Long  Pha Lai

Very poor diversification

The 3 months correlation between HID and Pha is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Ha Long Investment 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 Ha Long 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 Ha Long Investment 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 Ha Long i.e., Ha Long and Pha Lai go up and down completely randomly.

Pair Corralation between Ha Long and Pha Lai

Assuming the 90 days trading horizon Ha Long Investment is expected to generate 1.4 times more return on investment than Pha Lai. However, Ha Long is 1.4 times more volatile than Pha Lai Thermal. It trades about 0.07 of its potential returns per unit of risk. Pha Lai Thermal is currently generating about 0.09 per unit of risk. If you would invest  266,000  in Ha Long Investment on December 28, 2024 and sell it today you would earn a total of  12,000  from holding Ha Long Investment or generate 4.51% return on investment over 90 days.

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

Ha Long Investment  vs.  Pha Lai Thermal

Ha Long Investment

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ha Long Investment are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Ha Long is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the 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 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Pha Lai is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ha Long and Pha Lai

The main advantage of trading using opposite Ha Long and Pha Lai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ha Long 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 Ha Long Investment 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.