Correlation Between Home Product and Supalai Public

Can any of the company-specific risk be diversified away by investing in both Home Product and Supalai Public 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 Home Product and Supalai Public into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Home Product Center and Supalai Public, you can compare the effects of market volatilities on Home Product and Supalai Public 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 Home Product with a short position of Supalai Public. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Product and Supalai Public.

Diversification Opportunities for Home Product and Supalai Public

0.17

Correlation Coefficient

Home Product  Supalai Public

Average diversification

The 3 months correlation between Home and Supalai is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Home Product Center and Supalai Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Supalai Public and Home Product 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 Home Product Center are associated (or correlated) with Supalai Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Supalai Public has no effect on the direction of Home Product i.e., Home Product and Supalai Public go up and down completely randomly.

Pair Corralation between Home Product and Supalai Public

Assuming the 90 days trading horizon Home Product is expected to generate 198.4 times less return on investment than Supalai Public. But when comparing it to its historical volatility, Home Product Center is 61.08 times less risky than Supalai Public. It trades about 0.03 of its potential returns per unit of risk. Supalai Public is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,119  in Supalai Public on September 5, 2024 and sell it today you would lose (189.00) from holding Supalai Public or give up 8.92% of portfolio value over 90 days.

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

Home Product Center  vs.  Supalai Public

Home Product Center

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Home Product Center are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Home Product is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Supalai Public

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Supalai Public are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak essential indicators, Supalai Public reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Home Product and Supalai Public

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

The idea behind Home Product Center and Supalai 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..