Correlation Between CPR Gomu and Siam Cement

Can any of the company-specific risk be diversified away by investing in both CPR Gomu and Siam Cement 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 CPR Gomu and Siam Cement into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CPR Gomu Industrial and The Siam Cement, you can compare the effects of market volatilities on CPR Gomu and Siam Cement 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 CPR Gomu with a short position of Siam Cement. Check out your portfolio center. Please also check ongoing floating volatility patterns of CPR Gomu and Siam Cement.

Diversification Opportunities for CPR Gomu and Siam Cement

0.52

Correlation Coefficient

CPR Gomu  Siam Cement

Very weak diversification

The 3 months correlation between CPR and Siam is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding CPR Gomu Industrial and The Siam Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siam Cement and CPR Gomu 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 CPR Gomu Industrial are associated (or correlated) with Siam Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siam Cement has no effect on the direction of CPR Gomu i.e., CPR Gomu and Siam Cement go up and down completely randomly.

Pair Corralation between CPR Gomu and Siam Cement

Assuming the 90 days trading horizon CPR Gomu Industrial is expected to under-perform the Siam Cement. But the stock apears to be less risky and, when comparing its historical volatility, CPR Gomu Industrial is 1.53 times less risky than Siam Cement. The stock trades about -0.07 of its potential returns per unit of risk. The The Siam Cement is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  16,800  in The Siam Cement on December 28, 2024 and sell it today you would lose (1,000.00) from holding The Siam Cement or give up 5.95% of portfolio value over 90 days.

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

CPR Gomu Industrial  vs.  The Siam Cement

CPR Gomu Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days CPR Gomu Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Siam Cement

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Siam Cement has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Siam Cement is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with CPR Gomu and Siam Cement

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

The idea behind CPR Gomu Industrial and The Siam Cement 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.