Correlation Between Military Insurance and Pha Lai

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

By analyzing existing cross correlation between Military Insurance Corp and Pha Lai Thermal, you can compare the effects of market volatilities on Military Insurance and Pha Lai 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 Military Insurance with a short position of Pha Lai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Military Insurance and Pha Lai.

Diversification Opportunities for Military Insurance and Pha Lai

-0.44

Correlation Coefficient

Military Insurance  Pha Lai

Very good diversification

The 3 months correlation between Military and Pha is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Military Insurance Corp and Pha Lai Thermal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pha Lai Thermal and Military Insurance 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 Military Insurance Corp are associated (or correlated) with Pha Lai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pha Lai Thermal has no effect on the direction of Military Insurance i.e., Military Insurance and Pha Lai go up and down completely randomly.

Pair Corralation between Military Insurance and Pha Lai

Assuming the 90 days trading horizon Military Insurance Corp is expected to generate 1.77 times more return on investment than Pha Lai. However, Military Insurance is 1.77 times more volatile than Pha Lai Thermal. It trades about -0.05 of its potential returns per unit of risk. Pha Lai Thermal is currently generating about -0.14 per unit of risk. If you would invest  2,115,000  in Military Insurance Corp on September 29, 2024 and sell it today you would lose (365,000) from holding Military Insurance Corp or give up 17.26% of portfolio value over 90 days.

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

Military Insurance Corp  vs.  Pha Lai Thermal

Military Insurance Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Military Insurance Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Military Insurance is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pha Lai Thermal

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Military Insurance and Pha Lai

The main advantage of trading using opposite Military Insurance and Pha Lai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Military Insurance position performs unexpectedly, Pha Lai 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 Lai will offset losses from the drop in Pha Lai's long position.

The idea behind Military Insurance Corp and Pha Lai Thermal 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.