Correlation Between Phuoc Hoa and Danang Airport

Can any of the company-specific risk be diversified away by investing in both Phuoc Hoa and Danang Airport 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 Danang Airport 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 Danang Airport Services, you can compare the effects of market volatilities on Phuoc Hoa and Danang Airport 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 Danang Airport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Phuoc Hoa and Danang Airport.

Diversification Opportunities for Phuoc Hoa and Danang Airport

-0.44

Correlation Coefficient

Phuoc Hoa  Danang Airport

Very good diversification

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

Pair Corralation between Phuoc Hoa and Danang Airport

Assuming the 90 days trading horizon Phuoc Hoa Rubber is expected to generate 0.45 times more return on investment than Danang Airport. However, Phuoc Hoa Rubber is 2.22 times less risky than Danang Airport. It trades about -0.05 of its potential returns per unit of risk. Danang Airport Services is currently generating about -0.03 per unit of risk. If you would invest  5,693,878  in Phuoc Hoa Rubber on September 29, 2024 and sell it today you would lose (353,878) from holding Phuoc Hoa Rubber or give up 6.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	50.77%
Values	Daily Returns

Phuoc Hoa Rubber  vs.  Danang Airport Services

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.

Danang Airport Services

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Phuoc Hoa and Danang Airport

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

The idea behind Phuoc Hoa Rubber and Danang Airport Services 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.