Correlation Between Truong Thanh and Pha Lai

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

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

Diversification Opportunities for Truong Thanh and Pha Lai

0.21

Correlation Coefficient

Truong Thanh  Pha Lai

Modest diversification

The 3 months correlation between Truong and Pha is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Truong Thanh Furniture 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 Truong Thanh 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 Truong Thanh Furniture 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 Truong Thanh i.e., Truong Thanh and Pha Lai go up and down completely randomly.

Pair Corralation between Truong Thanh and Pha Lai

Assuming the 90 days trading horizon Truong Thanh Furniture is expected to under-perform the Pha Lai. In addition to that, Truong Thanh is 2.06 times more volatile than Pha Lai Thermal. It trades about -0.05 of its total potential returns per unit of risk. Pha Lai Thermal is currently generating about -0.03 per unit of volatility. If you would invest  1,152,332  in Pha Lai Thermal on September 29, 2024 and sell it today you would lose (22,332) from holding Pha Lai Thermal or give up 1.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.48%
Values	Daily Returns

Truong Thanh Furniture  vs.  Pha Lai Thermal

Truong Thanh Furniture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Truong Thanh Furniture has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Truong Thanh 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 Truong Thanh and Pha Lai

The main advantage of trading using opposite Truong Thanh and Pha Lai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Truong Thanh 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 Truong Thanh Furniture 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.