Correlation Between Pha Lai and Innovative Technology

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

Diversification Opportunities for Pha Lai and Innovative Technology

0.17

Correlation Coefficient

Pha Lai  Innovative Technology

Average diversification

The 3 months correlation between Pha and Innovative is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Pha Lai Thermal and Innovative Technology Developm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovative Technology 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 Innovative Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovative Technology has no effect on the direction of Pha Lai i.e., Pha Lai and Innovative Technology go up and down completely randomly.

Pair Corralation between Pha Lai and Innovative Technology

Assuming the 90 days trading horizon Pha Lai Thermal is expected to under-perform the Innovative Technology. But the stock apears to be less risky and, when comparing its historical volatility, Pha Lai Thermal is 1.18 times less risky than Innovative Technology. The stock trades about -0.01 of its potential returns per unit of risk. The Innovative Technology Development is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,160,000  in Innovative Technology Development on September 14, 2024 and sell it today you would earn a total of  165,000  from holding Innovative Technology Development or generate 14.22% return on investment over 90 days.

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

Pha Lai Thermal  vs.  Innovative Technology Developm

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 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.

Innovative Technology

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Innovative Technology Development are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Innovative Technology displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pha Lai and Innovative Technology

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

The idea behind Pha Lai Thermal and Innovative Technology Development 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.