Correlation Between Hwa Fong and CIMB Thai

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

By analyzing existing cross correlation between Hwa Fong Rubber and CIMB Thai Bank, you can compare the effects of market volatilities on Hwa Fong and CIMB Thai 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 Hwa Fong with a short position of CIMB Thai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hwa Fong and CIMB Thai.

Diversification Opportunities for Hwa Fong and CIMB Thai

0.66

Correlation Coefficient

Hwa Fong  CIMB Thai

Poor diversification

The 3 months correlation between Hwa and CIMB is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Hwa Fong Rubber and CIMB Thai Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIMB Thai Bank and Hwa Fong 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 Hwa Fong Rubber are associated (or correlated) with CIMB Thai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIMB Thai Bank has no effect on the direction of Hwa Fong i.e., Hwa Fong and CIMB Thai go up and down completely randomly.

Pair Corralation between Hwa Fong and CIMB Thai

Assuming the 90 days trading horizon Hwa Fong Rubber is expected to generate 0.66 times more return on investment than CIMB Thai. However, Hwa Fong Rubber is 1.52 times less risky than CIMB Thai. It trades about 0.14 of its potential returns per unit of risk. CIMB Thai Bank is currently generating about -0.35 per unit of risk. If you would invest  422.00  in Hwa Fong Rubber on October 7, 2024 and sell it today you would earn a total of  14.00  from holding Hwa Fong Rubber or generate 3.32% return on investment over 90 days.

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

Hwa Fong Rubber  vs.  CIMB Thai Bank

Hwa Fong Rubber

Risk-Adjusted Performance

0 of 100

Very Weak

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

CIMB Thai Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CIMB Thai Bank 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 fundamental drivers remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Hwa Fong and CIMB Thai

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

The idea behind Hwa Fong Rubber and CIMB Thai Bank 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.