Correlation Between Pha Lai and Vien Dong

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

Diversification Opportunities for Pha Lai and Vien Dong

0.81

Correlation Coefficient

Pha Lai  Vien Dong

Very poor diversification

The 3 months correlation between Pha and Vien is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Pha Lai Thermal and Vien Dong Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vien Dong Investment 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 Vien Dong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vien Dong Investment has no effect on the direction of Pha Lai i.e., Pha Lai and Vien Dong go up and down completely randomly.

Pair Corralation between Pha Lai and Vien Dong

Assuming the 90 days trading horizon Pha Lai is expected to generate 1.57 times less return on investment than Vien Dong. But when comparing it to its historical volatility, Pha Lai Thermal is 2.13 times less risky than Vien Dong. It trades about 0.08 of its potential returns per unit of risk. Vien Dong Investment is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  493,000  in Vien Dong Investment on December 28, 2024 and sell it today you would earn a total of  27,000  from holding Vien Dong Investment or generate 5.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	96.61%
Values	Daily Returns

Pha Lai Thermal  vs.  Vien Dong Investment

Pha Lai Thermal

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pha Lai Thermal are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Pha Lai is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Vien Dong Investment

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vien Dong Investment are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Vien Dong may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Pha Lai and Vien Dong

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

The idea behind Pha Lai Thermal and Vien Dong Investment 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.