Correlation Between CSP Steel and SET50 Index

Can any of the company-specific risk be diversified away by investing in both CSP Steel and SET50 Index 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 CSP Steel and SET50 Index into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CSP Steel Center and SET50 Index, you can compare the effects of market volatilities on CSP Steel and SET50 Index 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 CSP Steel with a short position of SET50 Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSP Steel and SET50 Index.

Diversification Opportunities for CSP Steel and SET50 Index

0.74

Correlation Coefficient

CSP Steel  SET50 Index

Poor diversification

The 3 months correlation between CSP and SET50 is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding CSP Steel Center and SET50 Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SET50 Index and CSP 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 CSP Steel Center are associated (or correlated) with SET50 Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SET50 Index has no effect on the direction of CSP Steel i.e., CSP Steel and SET50 Index go up and down completely randomly.

Pair Corralation between CSP Steel and SET50 Index

Assuming the 90 days trading horizon CSP Steel Center is expected to generate 2.38 times more return on investment than SET50 Index. However, CSP Steel is 2.38 times more volatile than SET50 Index. It trades about -0.02 of its potential returns per unit of risk. SET50 Index is currently generating about -0.23 per unit of risk. If you would invest  54.00  in CSP Steel Center on December 22, 2024 and sell it today you would lose (3.00) from holding CSP Steel Center or give up 5.56% of portfolio value over 90 days.

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

CSP Steel Center  vs.  SET50 Index

Pair Trading with CSP Steel and SET50 Index

The main advantage of trading using opposite CSP Steel and SET50 Index positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSP Steel position performs unexpectedly, SET50 Index 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 SET50 Index will offset losses from the drop in SET50 Index's long position.

The idea behind CSP Steel Center and SET50 Index 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.