Correlation Between Hwa Fong and Somboon Advance

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

Diversification Opportunities for Hwa Fong and Somboon Advance

-0.38

Correlation Coefficient

Hwa Fong  Somboon Advance

Very good diversification

The 3 months correlation between Hwa and Somboon is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Hwa Fong Rubber and Somboon Advance Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Somboon Advance Tech 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 Somboon Advance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Somboon Advance Tech has no effect on the direction of Hwa Fong i.e., Hwa Fong and Somboon Advance go up and down completely randomly.

Pair Corralation between Hwa Fong and Somboon Advance

Assuming the 90 days trading horizon Hwa Fong Rubber is expected to under-perform the Somboon Advance. But the stock apears to be less risky and, when comparing its historical volatility, Hwa Fong Rubber is 2.31 times less risky than Somboon Advance. The stock trades about -0.05 of its potential returns per unit of risk. The Somboon Advance Technology is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,100  in Somboon Advance Technology on December 4, 2024 and sell it today you would earn a total of  140.00  from holding Somboon Advance Technology or generate 12.73% return on investment over 90 days.

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

Hwa Fong Rubber  vs.  Somboon Advance Technology

Hwa Fong Rubber

Risk-Adjusted Performance

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.

Somboon Advance Tech

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Somboon Advance Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Somboon Advance disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hwa Fong and Somboon Advance

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

The idea behind Hwa Fong Rubber and Somboon Advance Technology 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.