Correlation Between Elcom Technology and Pha Le

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

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

Diversification Opportunities for Elcom Technology and Pha Le

-0.59

Correlation Coefficient

Elcom Technology  Pha Le

Excellent diversification

The 3 months correlation between Elcom and Pha is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Elcom Technology Communication 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 Elcom Technology 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 Elcom Technology Communications 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 Elcom Technology i.e., Elcom Technology and Pha Le go up and down completely randomly.

Pair Corralation between Elcom Technology and Pha Le

Assuming the 90 days trading horizon Elcom Technology is expected to generate 2.49 times less return on investment than Pha Le. But when comparing it to its historical volatility, Elcom Technology Communications is 1.37 times less risky than Pha Le. It trades about 0.06 of its potential returns per unit of risk. Pha Le Plastics is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  440,000  in Pha Le Plastics on September 16, 2024 and sell it today you would earn a total of  24,000  from holding Pha Le Plastics or generate 5.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Elcom Technology Communication  vs.  Pha Le Plastics

Elcom Technology Com

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Elcom Technology Communications are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Elcom Technology displayed solid returns over the last few months and may actually be approaching a breakup point.

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 Elcom Technology and Pha Le

The main advantage of trading using opposite Elcom Technology and Pha Le positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elcom Technology 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 Elcom Technology Communications 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 Stocks Directory module to find actively traded stocks across global markets.