Correlation Between CSP Steel and Thai Industrial

Can any of the company-specific risk be diversified away by investing in both CSP Steel and Thai Industrial 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 Thai Industrial 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 Thai Industrial, you can compare the effects of market volatilities on CSP Steel and Thai Industrial 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 Thai Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSP Steel and Thai Industrial.

Diversification Opportunities for CSP Steel and Thai Industrial

0.75

Correlation Coefficient

CSP Steel  Thai Industrial

Poor diversification

The 3 months correlation between CSP and Thai is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding CSP Steel Center and Thai Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Industrial 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 Thai Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Industrial has no effect on the direction of CSP Steel i.e., CSP Steel and Thai Industrial go up and down completely randomly.

Pair Corralation between CSP Steel and Thai Industrial

Assuming the 90 days trading horizon CSP Steel Center is expected to under-perform the Thai Industrial. In addition to that, CSP Steel is 5.16 times more volatile than Thai Industrial. It trades about -0.11 of its total potential returns per unit of risk. Thai Industrial is currently generating about -0.15 per unit of volatility. If you would invest  770.00  in Thai Industrial on September 16, 2024 and sell it today you would lose (10.00) from holding Thai Industrial or give up 1.3% 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.  Thai Industrial

CSP Steel Center

Risk-Adjusted Performance

0 of 100

Very Weak

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

Thai Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thai Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Thai Industrial 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 CSP Steel and Thai Industrial

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

The idea behind CSP Steel Center and Thai Industrial 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..