Correlation Between Pha Lai and Japan Vietnam
Can any of the company-specific risk be diversified away by investing in both Pha Lai and Japan Vietnam 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 Lai and Japan Vietnam into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pha Lai Thermal and Japan Vietnam Medical, you can compare the effects of market volatilities on Pha Lai and Japan Vietnam 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 Lai with a short position of Japan Vietnam. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pha Lai and Japan Vietnam.
Diversification Opportunities for Pha Lai and Japan Vietnam
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pha and Japan is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Pha Lai Thermal and Japan Vietnam Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Vietnam Medical and Pha Lai 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 Lai Thermal are associated (or correlated) with Japan Vietnam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Vietnam Medical has no effect on the direction of Pha Lai i.e., Pha Lai and Japan Vietnam go up and down completely randomly.
Pair Corralation between Pha Lai and Japan Vietnam
Assuming the 90 days trading horizon Pha Lai Thermal is expected to under-perform the Japan Vietnam. But the stock apears to be less risky and, when comparing its historical volatility, Pha Lai Thermal is 1.09 times less risky than Japan Vietnam. The stock trades about -0.36 of its potential returns per unit of risk. The Japan Vietnam Medical is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 330,000 in Japan Vietnam Medical on September 1, 2024 and sell it today you would lose (7,000) from holding Japan Vietnam Medical or give up 2.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pha Lai Thermal vs. Japan Vietnam Medical
Performance |
| Timeline |
| Pha Lai Thermal |
| Japan Vietnam Medical |
Pha Lai and Japan Vietnam Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pha Lai and Japan Vietnam
The main advantage of trading using opposite Pha Lai and Japan Vietnam positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pha Lai position performs unexpectedly, Japan Vietnam 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 Japan Vietnam will offset losses from the drop in Japan Vietnam's long position.The idea behind Pha Lai Thermal and Japan Vietnam Medical 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.| Japan Vietnam vs. FIT INVEST JSC | Japan Vietnam vs. Damsan JSC | Japan Vietnam vs. An Phat Plastic | Japan Vietnam vs. Alphanam ME |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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