Correlation Between EDP Energias and Siam Cement

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

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

Diversification Opportunities for EDP Energias and Siam Cement

0.41

Correlation Coefficient

EDP Energias  Siam Cement

Very weak diversification

The 3 months correlation between EDP and Siam is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding EDP Energias de and The Siam Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siam Cement and EDP Energias 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 EDP Energias de 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 EDP Energias i.e., EDP Energias and Siam Cement go up and down completely randomly.

Pair Corralation between EDP Energias and Siam Cement

Assuming the 90 days horizon EDP Energias de is expected to generate 0.33 times more return on investment than Siam Cement. However, EDP Energias de is 3.07 times less risky than Siam Cement. It trades about -0.03 of its potential returns per unit of risk. The Siam Cement is currently generating about -0.01 per unit of risk. If you would invest  4,570  in EDP Energias de on September 26, 2024 and sell it today you would lose (1,269) from holding EDP Energias de or give up 27.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	71.03%
Values	Daily Returns

EDP Energias de  vs.  The Siam Cement

EDP Energias de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EDP Energias de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Siam Cement

Risk-Adjusted Performance

0 of 100

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 weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with EDP Energias and Siam Cement

The main advantage of trading using opposite EDP Energias and Siam Cement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EDP Energias 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 EDP Energias de 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.