Correlation Between Pha Le and PVI Reinsurance

Can any of the company-specific risk be diversified away by investing in both Pha Le and PVI Reinsurance 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 PVI Reinsurance 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 PVI Reinsurance Corp, you can compare the effects of market volatilities on Pha Le and PVI Reinsurance 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 PVI Reinsurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pha Le and PVI Reinsurance.

Diversification Opportunities for Pha Le and PVI Reinsurance

0.36

Correlation Coefficient

Pha Le  PVI Reinsurance

Weak diversification

The 3 months correlation between Pha and PVI is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Pha Le Plastics and PVI Reinsurance Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PVI Reinsurance Corp 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 PVI Reinsurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PVI Reinsurance Corp has no effect on the direction of Pha Le i.e., Pha Le and PVI Reinsurance go up and down completely randomly.

Pair Corralation between Pha Le and PVI Reinsurance

Assuming the 90 days trading horizon Pha Le Plastics is expected to generate 0.56 times more return on investment than PVI Reinsurance. However, Pha Le Plastics is 1.8 times less risky than PVI Reinsurance. It trades about 0.28 of its potential returns per unit of risk. PVI Reinsurance Corp is currently generating about 0.01 per unit of risk. If you would invest  458,000  in Pha Le Plastics on October 20, 2024 and sell it today you would earn a total of  58,000  from holding Pha Le Plastics or generate 12.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.91%
Values	Daily Returns

Pha Le Plastics  vs.  PVI Reinsurance Corp

Pha Le Plastics

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pha Le Plastics are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Pha Le may actually be approaching a critical reversion point that can send shares even higher in February 2025.

PVI Reinsurance Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PVI Reinsurance Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, PVI Reinsurance is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Pha Le and PVI Reinsurance

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

The idea behind Pha Le Plastics and PVI Reinsurance Corp 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.