Correlation Between City Steel and Bangchak Public

Can any of the company-specific risk be diversified away by investing in both City Steel and Bangchak Public 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 City Steel and Bangchak Public into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between City Steel Public and Bangchak Public, you can compare the effects of market volatilities on City Steel and Bangchak Public 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 City Steel with a short position of Bangchak Public. Check out your portfolio center. Please also check ongoing floating volatility patterns of City Steel and Bangchak Public.

Diversification Opportunities for City Steel and Bangchak Public

0.03

Correlation Coefficient

City Steel  Bangchak Public

Significant diversification

The 3 months correlation between City and Bangchak is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding City Steel Public and Bangchak Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bangchak Public and City Steel 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 City Steel Public are associated (or correlated) with Bangchak Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bangchak Public has no effect on the direction of City Steel i.e., City Steel and Bangchak Public go up and down completely randomly.

Pair Corralation between City Steel and Bangchak Public

Assuming the 90 days trading horizon City Steel Public is expected to generate 54.32 times more return on investment than Bangchak Public. However, City Steel is 54.32 times more volatile than Bangchak Public. It trades about 0.13 of its potential returns per unit of risk. Bangchak Public is currently generating about -0.1 per unit of risk. If you would invest  0.00  in City Steel Public on September 3, 2024 and sell it today you would earn a total of  186.00  from holding City Steel Public or generate 9.223372036854776E16% return on investment over 90 days.

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

City Steel Public  vs.  Bangchak Public

City Steel Public

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in City Steel Public are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, City Steel disclosed solid returns over the last few months and may actually be approaching a breakup point.

Bangchak Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bangchak Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with City Steel and Bangchak Public

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

The idea behind City Steel Public and Bangchak Public 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.

Check out your portfolio center.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.