Correlation Between Pacific Petroleum and Pha Le

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

By analyzing existing cross correlation between Pacific Petroleum Transportation and Pha Le Plastics, you can compare the effects of market volatilities on Pacific Petroleum and Pha Le 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 Pacific Petroleum with a short position of Pha Le. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacific Petroleum and Pha Le.

Diversification Opportunities for Pacific Petroleum and Pha Le

-0.57

Correlation Coefficient

Pacific Petroleum  Pha Le

Excellent diversification

The 3 months correlation between Pacific and Pha is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Petroleum Transportati and Pha Le Plastics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pha Le Plastics and Pacific Petroleum 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 Pacific Petroleum Transportation are associated (or correlated) with Pha Le. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pha Le Plastics has no effect on the direction of Pacific Petroleum i.e., Pacific Petroleum and Pha Le go up and down completely randomly.

Pair Corralation between Pacific Petroleum and Pha Le

Assuming the 90 days trading horizon Pacific Petroleum Transportation is expected to under-perform the Pha Le. In addition to that, Pacific Petroleum is 1.15 times more volatile than Pha Le Plastics. It trades about -0.1 of its total potential returns per unit of risk. Pha Le Plastics is currently generating about 0.11 per unit of volatility. If you would invest  450,000  in Pha Le Plastics on December 21, 2024 and sell it today you would earn a total of  40,000  from holding Pha Le Plastics or generate 8.89% return on investment over 90 days.

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

Pacific Petroleum Transportati  vs.  Pha Le Plastics

Pacific Petroleum

Risk-Adjusted Performance

Very Weak

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

Pha Le Plastics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pha Le Plastics are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Pha Le may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Pacific Petroleum and Pha Le

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

The idea behind Pacific Petroleum Transportation and Pha Le Plastics 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.