Correlation Between Hochiminh City and Pha Le
Can any of the company-specific risk be diversified away by investing in both Hochiminh City 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 Hochiminh City and Pha Le into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hochiminh City Metal and Pha Le Plastics, you can compare the effects of market volatilities on Hochiminh City 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 Hochiminh City with a short position of Pha Le. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hochiminh City and Pha Le.
Diversification Opportunities for Hochiminh City and Pha Le
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Hochiminh and Pha is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Hochiminh City Metal 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 Hochiminh City 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 Hochiminh City Metal 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 Hochiminh City i.e., Hochiminh City and Pha Le go up and down completely randomly.
Pair Corralation between Hochiminh City and Pha Le
Assuming the 90 days trading horizon Hochiminh City Metal is expected to under-perform the Pha Le. In addition to that, Hochiminh City is 1.13 times more volatile than Pha Le Plastics. It trades about 0.0 of its total potential returns per unit of risk. Pha Le Plastics is currently generating about 0.07 per unit of volatility. If you would invest 500,000 in Pha Le Plastics on November 7, 2024 and sell it today you would earn a total of 9,000 from holding Pha Le Plastics or generate 1.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hochiminh City Metal vs. Pha Le Plastics
Performance |
| Timeline |
| Hochiminh City Metal |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
| Pha Le Plastics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
Hochiminh City and Pha Le Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hochiminh City and Pha Le
The main advantage of trading using opposite Hochiminh City and Pha Le positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hochiminh City 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 Hochiminh City Metal 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.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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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