Correlation Between Pha Lai and SMC Investment

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

Diversification Opportunities for Pha Lai and SMC Investment

-0.03

Correlation Coefficient

Pha Lai  SMC Investment

Good diversification

The 3 months correlation between Pha and SMC is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Pha Lai Thermal and SMC Investment Trading in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMC Investment Trading 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 SMC Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMC Investment Trading has no effect on the direction of Pha Lai i.e., Pha Lai and SMC Investment go up and down completely randomly.

Pair Corralation between Pha Lai and SMC Investment

Assuming the 90 days trading horizon Pha Lai is expected to generate 8.37 times less return on investment than SMC Investment. But when comparing it to its historical volatility, Pha Lai Thermal is 3.58 times less risky than SMC Investment. It trades about 0.11 of its potential returns per unit of risk. SMC Investment Trading is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  695,000  in SMC Investment Trading on September 22, 2024 and sell it today you would earn a total of  109,000  from holding SMC Investment Trading or generate 15.68% return on investment over 90 days.

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

Pha Lai Thermal  vs.  SMC Investment Trading

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.

SMC Investment Trading

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SMC Investment Trading are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, SMC Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Pha Lai and SMC Investment

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

The idea behind Pha Lai Thermal and SMC Investment Trading 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.