Correlation Between Pha Lai and Ducgiang Chemicals

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

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

Diversification Opportunities for Pha Lai and Ducgiang Chemicals

0.12

Correlation Coefficient

Pha Lai  Ducgiang Chemicals

Average diversification

The 3 months correlation between Pha and Ducgiang is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Pha Lai Thermal and Ducgiang Chemicals Detergent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ducgiang Chemicals and Pha Lai 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 Pha Lai Thermal are associated (or correlated) with Ducgiang Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ducgiang Chemicals has no effect on the direction of Pha Lai i.e., Pha Lai and Ducgiang Chemicals go up and down completely randomly.

Pair Corralation between Pha Lai and Ducgiang Chemicals

Assuming the 90 days trading horizon Pha Lai Thermal is expected to under-perform the Ducgiang Chemicals. But the stock apears to be less risky and, when comparing its historical volatility, Pha Lai Thermal is 1.26 times less risky than Ducgiang Chemicals. The stock trades about -0.14 of its potential returns per unit of risk. The Ducgiang Chemicals Detergent is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  11,876,100  in Ducgiang Chemicals Detergent on September 29, 2024 and sell it today you would lose (176,100) from holding Ducgiang Chemicals Detergent or give up 1.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Pha Lai Thermal  vs.  Ducgiang Chemicals Detergent

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.

Ducgiang Chemicals

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Pha Lai and Ducgiang Chemicals

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

The idea behind Pha Lai Thermal and Ducgiang Chemicals Detergent 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.