Correlation Between Petrolimex International and Pha Lai

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

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

Diversification Opportunities for Petrolimex International and Pha Lai

0.68

Correlation Coefficient

Petrolimex International  Pha Lai

Poor diversification

The 3 months correlation between Petrolimex and Pha is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Petrolimex International Tradi 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 Petrolimex International 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 Petrolimex International Trading 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 Petrolimex International i.e., Petrolimex International and Pha Lai go up and down completely randomly.

Pair Corralation between Petrolimex International and Pha Lai

Assuming the 90 days trading horizon Petrolimex International Trading is expected to generate 3.25 times more return on investment than Pha Lai. However, Petrolimex International is 3.25 times more volatile than Pha Lai Thermal. It trades about 0.16 of its potential returns per unit of risk. Pha Lai Thermal is currently generating about 0.08 per unit of risk. If you would invest  525,000  in Petrolimex International Trading on December 30, 2024 and sell it today you would earn a total of  145,000  from holding Petrolimex International Trading or generate 27.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.67%
Values	Daily Returns

Petrolimex International Tradi  vs.  Pha Lai Thermal

Petrolimex International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Petrolimex International Trading are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Petrolimex International displayed solid returns over the last few months and may actually be approaching a breakup point.

Pha Lai Thermal

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pha Lai Thermal are ranked lower than 6 (%) 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 Petrolimex International and Pha Lai

The main advantage of trading using opposite Petrolimex International and Pha Lai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petrolimex International 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 Petrolimex International Trading 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.

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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.