Correlation Between An Phat and Bao Ngoc
Can any of the company-specific risk be diversified away by investing in both An Phat and Bao Ngoc 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 An Phat and Bao Ngoc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between An Phat Plastic and Bao Ngoc Investment, you can compare the effects of market volatilities on An Phat and Bao Ngoc 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 An Phat with a short position of Bao Ngoc. Check out your portfolio center. Please also check ongoing floating volatility patterns of An Phat and Bao Ngoc.
Diversification Opportunities for An Phat and Bao Ngoc
Poor diversification
The 3 months correlation between AAA and Bao is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding An Phat Plastic and Bao Ngoc Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bao Ngoc Investment and An Phat 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 An Phat Plastic are associated (or correlated) with Bao Ngoc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bao Ngoc Investment has no effect on the direction of An Phat i.e., An Phat and Bao Ngoc go up and down completely randomly.
Pair Corralation between An Phat and Bao Ngoc
Assuming the 90 days trading horizon An Phat Plastic is expected to generate 0.4 times more return on investment than Bao Ngoc. However, An Phat Plastic is 2.5 times less risky than Bao Ngoc. It trades about -0.05 of its potential returns per unit of risk. Bao Ngoc Investment is currently generating about -0.03 per unit of risk. If you would invest 860,000 in An Phat Plastic on November 6, 2024 and sell it today you would lose (27,000) from holding An Phat Plastic or give up 3.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
An Phat Plastic vs. Bao Ngoc Investment
Performance |
| Timeline |
| An Phat Plastic |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Bao Ngoc Investment |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
An Phat and Bao Ngoc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with An Phat and Bao Ngoc
The main advantage of trading using opposite An Phat and Bao Ngoc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if An Phat position performs unexpectedly, Bao Ngoc 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 Bao Ngoc will offset losses from the drop in Bao Ngoc's long position.The idea behind An Phat Plastic and Bao Ngoc 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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