Correlation Between Phuoc Hoa and Southern Rubber

Can any of the company-specific risk be diversified away by investing in both Phuoc Hoa and Southern Rubber 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 Phuoc Hoa and Southern Rubber into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Phuoc Hoa Rubber and Southern Rubber Industry, you can compare the effects of market volatilities on Phuoc Hoa and Southern Rubber 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 Phuoc Hoa with a short position of Southern Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Phuoc Hoa and Southern Rubber.

Diversification Opportunities for Phuoc Hoa and Southern Rubber

0.25

Correlation Coefficient

Phuoc Hoa  Southern Rubber

Modest diversification

The 3 months correlation between Phuoc and Southern is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Phuoc Hoa Rubber and Southern Rubber Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Rubber Industry and Phuoc Hoa 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 Phuoc Hoa Rubber are associated (or correlated) with Southern Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Rubber Industry has no effect on the direction of Phuoc Hoa i.e., Phuoc Hoa and Southern Rubber go up and down completely randomly.

Pair Corralation between Phuoc Hoa and Southern Rubber

Assuming the 90 days trading horizon Phuoc Hoa Rubber is expected to under-perform the Southern Rubber. But the stock apears to be less risky and, when comparing its historical volatility, Phuoc Hoa Rubber is 1.45 times less risky than Southern Rubber. The stock trades about -0.03 of its potential returns per unit of risk. The Southern Rubber Industry is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,474,331  in Southern Rubber Industry on September 29, 2024 and sell it today you would earn a total of  85,669  from holding Southern Rubber Industry or generate 5.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.22%
Values	Daily Returns

Phuoc Hoa Rubber  vs.  Southern Rubber Industry

Phuoc Hoa Rubber

Risk-Adjusted Performance

0 of 100

Very Weak

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

Southern Rubber Industry

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Rubber Industry are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Southern Rubber displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Phuoc Hoa and Southern Rubber

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

The idea behind Phuoc Hoa Rubber and Southern Rubber Industry 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.