Correlation Between Hochiminh City and Pha Lai

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

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

Diversification Opportunities for Hochiminh City and Pha Lai

0.24

Correlation Coefficient

Hochiminh City  Pha Lai

Modest diversification

The 3 months correlation between Hochiminh and Pha is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Hochiminh City Metal 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 Hochiminh City 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 Hochiminh City Metal 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 Hochiminh City i.e., Hochiminh City and Pha Lai go up and down completely randomly.

Pair Corralation between Hochiminh City and Pha Lai

Assuming the 90 days trading horizon Hochiminh City Metal is expected to generate 2.7 times more return on investment than Pha Lai. However, Hochiminh City is 2.7 times more volatile than Pha Lai Thermal. It trades about 0.09 of its potential returns per unit of risk. Pha Lai Thermal is currently generating about 0.15 per unit of risk. If you would invest  1,085,000  in Hochiminh City Metal on November 19, 2024 and sell it today you would earn a total of  120,000  from holding Hochiminh City Metal or generate 11.06% return on investment over 90 days.

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

Hochiminh City Metal  vs.  Pha Lai Thermal

Hochiminh City Metal

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hochiminh City Metal are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Hochiminh City displayed solid returns over the last few months and may actually be approaching a breakup point.

Pha Lai Thermal

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pha Lai Thermal are ranked lower than 12 (%) 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 March 2025.

Pair Trading with Hochiminh City and Pha Lai

The main advantage of trading using opposite Hochiminh City and Pha Lai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hochiminh City 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 Hochiminh City Metal 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.