Correlation Between Thong Nhat and Pha Le

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

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

Diversification Opportunities for Thong Nhat and Pha Le

-0.38

Correlation Coefficient

Thong Nhat  Pha Le

Very good diversification

The 3 months correlation between Thong and Pha is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Thong Nhat Rubber 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 Thong Nhat 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 Thong Nhat Rubber 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 Thong Nhat i.e., Thong Nhat and Pha Le go up and down completely randomly.

Pair Corralation between Thong Nhat and Pha Le

Assuming the 90 days trading horizon Thong Nhat Rubber is expected to generate 3.42 times more return on investment than Pha Le. However, Thong Nhat is 3.42 times more volatile than Pha Le Plastics. It trades about 0.04 of its potential returns per unit of risk. Pha Le Plastics is currently generating about 0.12 per unit of risk. If you would invest  3,105,000  in Thong Nhat Rubber on December 20, 2024 and sell it today you would earn a total of  110,000  from holding Thong Nhat Rubber or generate 3.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	72.41%
Values	Daily Returns

Thong Nhat Rubber  vs.  Pha Le Plastics

Thong Nhat Rubber

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Thong Nhat Rubber are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Thong Nhat displayed solid returns over the last few months and may actually be approaching a breakup point.

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 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Pha Le may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Thong Nhat and Pha Le

The main advantage of trading using opposite Thong Nhat and Pha Le positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thong Nhat 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 Thong Nhat Rubber 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.