Correlation Between Hwa Fong and Thai Reinsurance

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

Diversification Opportunities for Hwa Fong and Thai Reinsurance

0.28

Correlation Coefficient

Hwa Fong  Thai Reinsurance

Modest diversification

The 3 months correlation between Hwa and Thai is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Hwa Fong Rubber and Thai Reinsurance Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Reinsurance Public 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 Thai Reinsurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Reinsurance Public has no effect on the direction of Hwa Fong i.e., Hwa Fong and Thai Reinsurance go up and down completely randomly.

Pair Corralation between Hwa Fong and Thai Reinsurance

Assuming the 90 days trading horizon Hwa Fong Rubber is expected to generate 0.39 times more return on investment than Thai Reinsurance. However, Hwa Fong Rubber is 2.55 times less risky than Thai Reinsurance. It trades about -0.23 of its potential returns per unit of risk. Thai Reinsurance Public is currently generating about -0.12 per unit of risk. If you would invest  424.00  in Hwa Fong Rubber on December 5, 2024 and sell it today you would lose (18.00) from holding Hwa Fong Rubber or give up 4.25% of portfolio value over 90 days.

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

Hwa Fong Rubber  vs.  Thai Reinsurance Public

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.

Thai Reinsurance Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Thai Reinsurance Public 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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Hwa Fong and Thai Reinsurance

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

The idea behind Hwa Fong Rubber and Thai Reinsurance Public 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.