Correlation Between Pha Le and Cotec Construction
Can any of the company-specific risk be diversified away by investing in both Pha Le and Cotec Construction 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 Pha Le and Cotec Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pha Le Plastics and Cotec Construction JSC, you can compare the effects of market volatilities on Pha Le and Cotec Construction 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 Pha Le with a short position of Cotec Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pha Le and Cotec Construction.
Diversification Opportunities for Pha Le and Cotec Construction
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pha and Cotec is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Pha Le Plastics and Cotec Construction JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cotec Construction JSC and Pha Le 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 Pha Le Plastics are associated (or correlated) with Cotec Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cotec Construction JSC has no effect on the direction of Pha Le i.e., Pha Le and Cotec Construction go up and down completely randomly.
Pair Corralation between Pha Le and Cotec Construction
Assuming the 90 days trading horizon Pha Le is expected to generate 5.97 times less return on investment than Cotec Construction. But when comparing it to its historical volatility, Pha Le Plastics is 1.29 times less risky than Cotec Construction. It trades about 0.02 of its potential returns per unit of risk. Cotec Construction JSC is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,475,278 in Cotec Construction JSC on November 5, 2024 and sell it today you would earn a total of 4,854,722 from holding Cotec Construction JSC or generate 196.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Pha Le Plastics vs. Cotec Construction JSC
Performance |
| Timeline |
| Pha Le Plastics |
| Cotec Construction JSC |
Pha Le and Cotec Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pha Le and Cotec Construction
The main advantage of trading using opposite Pha Le and Cotec Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pha Le position performs unexpectedly, Cotec Construction 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 Cotec Construction will offset losses from the drop in Cotec Construction's long position.| Pha Le vs. Hai An Transport | Pha Le vs. Petrolimex Petrochemical JSC | Pha Le vs. Transport and Industry | Pha Le vs. Nam Kim Steel |
| Cotec Construction vs. Sea Air Freight | Cotec Construction vs. Kien Giang Construction | Cotec Construction vs. SCG Construction JSC | Cotec Construction vs. Binh Duong Construction |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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