Correlation Between Phuoc Hoa and An Phat

Can any of the company-specific risk be diversified away by investing in both Phuoc Hoa and An Phat 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 Phuoc Hoa and An Phat into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Phuoc Hoa Rubber and An Phat Plastic, you can compare the effects of market volatilities on Phuoc Hoa and An Phat 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 Phuoc Hoa with a short position of An Phat. Check out your portfolio center. Please also check ongoing floating volatility patterns of Phuoc Hoa and An Phat.

Diversification Opportunities for Phuoc Hoa and An Phat

0.48

Correlation Coefficient

Phuoc Hoa  An Phat

Very weak diversification

The 3 months correlation between Phuoc and AAA is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Phuoc Hoa Rubber and An Phat Plastic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on An Phat Plastic and Phuoc Hoa 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 Phuoc Hoa Rubber are associated (or correlated) with An Phat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of An Phat Plastic has no effect on the direction of Phuoc Hoa i.e., Phuoc Hoa and An Phat go up and down completely randomly.

Pair Corralation between Phuoc Hoa and An Phat

Assuming the 90 days trading horizon Phuoc Hoa Rubber is expected to generate 1.48 times more return on investment than An Phat. However, Phuoc Hoa is 1.48 times more volatile than An Phat Plastic. It trades about 0.18 of its potential returns per unit of risk. An Phat Plastic is currently generating about -0.05 per unit of risk. If you would invest  5,390,000  in Phuoc Hoa Rubber on December 25, 2024 and sell it today you would earn a total of  1,060,000  from holding Phuoc Hoa Rubber or generate 19.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

Phuoc Hoa Rubber  vs.  An Phat Plastic

Phuoc Hoa Rubber

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Phuoc Hoa Rubber are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Phuoc Hoa displayed solid returns over the last few months and may actually be approaching a breakup point.

An Phat Plastic

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Phuoc Hoa and An Phat

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

The idea behind Phuoc Hoa Rubber and An Phat Plastic 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.