Correlation Between General Environmental and SET Total

Can any of the company-specific risk be diversified away by investing in both General Environmental and SET Total 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 General Environmental and SET Total into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between General Environmental Conservation and SET Total Return, you can compare the effects of market volatilities on General Environmental and SET Total 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 General Environmental with a short position of SET Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of General Environmental and SET Total.

Diversification Opportunities for General Environmental and SET Total

0.74

Correlation Coefficient

General Environmental  SET Total

Poor diversification

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

Pair Corralation between General Environmental and SET Total

Assuming the 90 days trading horizon General Environmental Conservation is expected to under-perform the SET Total. In addition to that, General Environmental is 3.56 times more volatile than SET Total Return. It trades about -0.15 of its total potential returns per unit of risk. SET Total Return is currently generating about -0.22 per unit of volatility. If you would invest  1,047,440  in SET Total Return on December 24, 2024 and sell it today you would lose (144,084) from holding SET Total Return or give up 13.76% of portfolio value over 90 days.

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

General Environmental Conserva  vs.  SET Total Return

Pair Trading with General Environmental and SET Total

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

The idea behind General Environmental Conservation and SET Total Return 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.