Correlation Between Phuoc Hoa and Binhthuan Agriculture
Can any of the company-specific risk be diversified away by investing in both Phuoc Hoa and Binhthuan Agriculture 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 Phuoc Hoa and Binhthuan Agriculture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Phuoc Hoa Rubber and Binhthuan Agriculture Services, you can compare the effects of market volatilities on Phuoc Hoa and Binhthuan Agriculture 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 Phuoc Hoa with a short position of Binhthuan Agriculture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Phuoc Hoa and Binhthuan Agriculture.
Diversification Opportunities for Phuoc Hoa and Binhthuan Agriculture
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Phuoc and Binhthuan is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Phuoc Hoa Rubber and Binhthuan Agriculture Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Binhthuan Agriculture and Phuoc Hoa 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 Phuoc Hoa Rubber are associated (or correlated) with Binhthuan Agriculture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Binhthuan Agriculture has no effect on the direction of Phuoc Hoa i.e., Phuoc Hoa and Binhthuan Agriculture go up and down completely randomly.
Pair Corralation between Phuoc Hoa and Binhthuan Agriculture
Assuming the 90 days trading horizon Phuoc Hoa Rubber is expected to generate 0.8 times more return on investment than Binhthuan Agriculture. However, Phuoc Hoa Rubber is 1.25 times less risky than Binhthuan Agriculture. It trades about 0.05 of its potential returns per unit of risk. Binhthuan Agriculture Services is currently generating about -0.02 per unit of risk. If you would invest 3,692,662 in Phuoc Hoa Rubber on November 7, 2024 and sell it today you would earn a total of 1,547,338 from holding Phuoc Hoa Rubber or generate 41.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Phuoc Hoa Rubber vs. Binhthuan Agriculture Services
Performance |
| Timeline |
| Phuoc Hoa Rubber |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Binhthuan Agriculture |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
Phuoc Hoa and Binhthuan Agriculture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Phuoc Hoa and Binhthuan Agriculture
The main advantage of trading using opposite Phuoc Hoa and Binhthuan Agriculture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Phuoc Hoa position performs unexpectedly, Binhthuan Agriculture 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 Binhthuan Agriculture will offset losses from the drop in Binhthuan Agriculture's long position.The idea behind Phuoc Hoa Rubber and Binhthuan Agriculture Services 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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