Correlation Between Pha Le and Southern Rubber

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

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

Diversification Opportunities for Pha Le and Southern Rubber

-0.34

Correlation Coefficient

Pha Le  Southern Rubber

Very good diversification

The 3 months correlation between Pha and Southern is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Pha Le Plastics and Southern Rubber Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Rubber Industry and Pha Le 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 Pha Le Plastics are associated (or correlated) with Southern Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Rubber Industry has no effect on the direction of Pha Le i.e., Pha Le and Southern Rubber go up and down completely randomly.

Pair Corralation between Pha Le and Southern Rubber

Assuming the 90 days trading horizon Pha Le is expected to generate 341.14 times less return on investment than Southern Rubber. But when comparing it to its historical volatility, Pha Le Plastics is 1.17 times less risky than Southern Rubber. It trades about 0.0 of its potential returns per unit of risk. Southern Rubber Industry is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  1,290,000  in Southern Rubber Industry on September 25, 2024 and sell it today you would earn a total of  275,000  from holding Southern Rubber Industry or generate 21.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Pha Le Plastics  vs.  Southern Rubber Industry

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 latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Southern Rubber Industry

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Rubber Industry are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Southern Rubber displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pha Le and Southern Rubber

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

The idea behind Pha Le Plastics and Southern Rubber Industry 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.