Correlation Between Pha Lai and Vietnam Rubber

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

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

Diversification Opportunities for Pha Lai and Vietnam Rubber

0.83

Correlation Coefficient

Pha Lai  Vietnam Rubber

Very poor diversification

The 3 months correlation between Pha and Vietnam is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Pha Lai Thermal and Vietnam Rubber Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vietnam Rubber Group and Pha Lai 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 Lai Thermal are associated (or correlated) with Vietnam Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vietnam Rubber Group has no effect on the direction of Pha Lai i.e., Pha Lai and Vietnam Rubber go up and down completely randomly.

Pair Corralation between Pha Lai and Vietnam Rubber

Assuming the 90 days trading horizon Pha Lai Thermal is expected to generate 0.36 times more return on investment than Vietnam Rubber. However, Pha Lai Thermal is 2.77 times less risky than Vietnam Rubber. It trades about -0.39 of its potential returns per unit of risk. Vietnam Rubber Group is currently generating about -0.4 per unit of risk. If you would invest  1,129,740  in Pha Lai Thermal on October 11, 2024 and sell it today you would lose (39,740) from holding Pha Lai Thermal or give up 3.52% of portfolio value over 90 days.

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

Pha Lai Thermal  vs.  Vietnam Rubber Group

Pha Lai Thermal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pha Lai Thermal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Vietnam Rubber Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vietnam Rubber Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Pha Lai and Vietnam Rubber

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

The idea behind Pha Lai Thermal and Vietnam Rubber Group 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.