Correlation Between Global Power and Thai Solar

Can any of the company-specific risk be diversified away by investing in both Global Power and Thai Solar 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 Global Power and Thai Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Global Power Synergy and Thai Solar Energy, you can compare the effects of market volatilities on Global Power and Thai Solar 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 Global Power with a short position of Thai Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Power and Thai Solar.

Diversification Opportunities for Global Power and Thai Solar

0.8

Correlation Coefficient

Global Power  Thai Solar

Very poor diversification

The 3 months correlation between Global and Thai is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Global Power Synergy and Thai Solar Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Solar Energy and Global Power 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 Global Power Synergy are associated (or correlated) with Thai Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Solar Energy has no effect on the direction of Global Power i.e., Global Power and Thai Solar go up and down completely randomly.

Pair Corralation between Global Power and Thai Solar

Assuming the 90 days trading horizon Global Power Synergy is expected to under-perform the Thai Solar. But the stock apears to be less risky and, when comparing its historical volatility, Global Power Synergy is 21.97 times less risky than Thai Solar. The stock trades about -0.05 of its potential returns per unit of risk. The Thai Solar Energy is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  227.00  in Thai Solar Energy on September 24, 2024 and sell it today you would lose (138.00) from holding Thai Solar Energy or give up 60.79% of portfolio value over 90 days.

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

Global Power Synergy  vs.  Thai Solar Energy

Global Power Synergy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Power Synergy 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 forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Thai Solar Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thai Solar Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Global Power and Thai Solar

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

The idea behind Global Power Synergy and Thai Solar Energy 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.