Correlation Between Khon Kaen and Indorama Ventures

Can any of the company-specific risk be diversified away by investing in both Khon Kaen and Indorama Ventures 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 Khon Kaen and Indorama Ventures into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Khon Kaen Sugar and Indorama Ventures PCL, you can compare the effects of market volatilities on Khon Kaen and Indorama Ventures 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 Khon Kaen with a short position of Indorama Ventures. Check out your portfolio center. Please also check ongoing floating volatility patterns of Khon Kaen and Indorama Ventures.

Diversification Opportunities for Khon Kaen and Indorama Ventures

0.16

Correlation Coefficient

Khon Kaen  Indorama Ventures

Average diversification

The 3 months correlation between Khon and Indorama is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Khon Kaen Sugar and Indorama Ventures PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indorama Ventures PCL and Khon Kaen 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 Khon Kaen Sugar are associated (or correlated) with Indorama Ventures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indorama Ventures PCL has no effect on the direction of Khon Kaen i.e., Khon Kaen and Indorama Ventures go up and down completely randomly.

Pair Corralation between Khon Kaen and Indorama Ventures

Assuming the 90 days trading horizon Khon Kaen Sugar is expected to under-perform the Indorama Ventures. But the stock apears to be less risky and, when comparing its historical volatility, Khon Kaen Sugar is 1.42 times less risky than Indorama Ventures. The stock trades about -0.04 of its potential returns per unit of risk. The Indorama Ventures PCL is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,046  in Indorama Ventures PCL on September 5, 2024 and sell it today you would earn a total of  414.00  from holding Indorama Ventures PCL or generate 20.23% return on investment over 90 days.

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

Khon Kaen Sugar  vs.  Indorama Ventures PCL

Khon Kaen Sugar

Risk-Adjusted Performance

0 of 100

Very Weak

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

Indorama Ventures PCL

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Indorama Ventures PCL are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, Indorama Ventures disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Khon Kaen and Indorama Ventures

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

The idea behind Khon Kaen Sugar and Indorama Ventures PCL 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.