Correlation Between Materials Petroleum and Pha Le

Can any of the company-specific risk be diversified away by investing in both Materials Petroleum 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 Materials Petroleum and Pha Le into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Materials Petroleum JSC and Pha Le Plastics, you can compare the effects of market volatilities on Materials Petroleum 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 Materials Petroleum with a short position of Pha Le. Check out your portfolio center. Please also check ongoing floating volatility patterns of Materials Petroleum and Pha Le.

Diversification Opportunities for Materials Petroleum and Pha Le

-0.22

Correlation Coefficient

Materials Petroleum  Pha Le

Very good diversification

The 3 months correlation between Materials and Pha is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Materials Petroleum JSC 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 Materials Petroleum 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 Materials Petroleum JSC 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 Materials Petroleum i.e., Materials Petroleum and Pha Le go up and down completely randomly.

Pair Corralation between Materials Petroleum and Pha Le

Assuming the 90 days trading horizon Materials Petroleum JSC is expected to generate 2.44 times more return on investment than Pha Le. However, Materials Petroleum is 2.44 times more volatile than Pha Le Plastics. It trades about 0.05 of its potential returns per unit of risk. Pha Le Plastics is currently generating about -0.03 per unit of risk. If you would invest  2,700,000  in Materials Petroleum JSC on September 16, 2024 and sell it today you would earn a total of  150,000  from holding Materials Petroleum JSC or generate 5.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	78.79%
Values	Daily Returns

Materials Petroleum JSC  vs.  Pha Le Plastics

Materials Petroleum JSC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Materials Petroleum JSC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Materials Petroleum may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pha Le Plastics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pha Le Plastics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Pha Le is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Materials Petroleum and Pha Le

The main advantage of trading using opposite Materials Petroleum and Pha Le positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Materials Petroleum 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 Materials Petroleum JSC 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.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.