Correlation Between K W and Siam Cement

Can any of the company-specific risk be diversified away by investing in both K W and Siam Cement 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 K W and Siam Cement into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between K W Metal and The Siam Cement, you can compare the effects of market volatilities on K W and Siam Cement 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 K W with a short position of Siam Cement. Check out your portfolio center. Please also check ongoing floating volatility patterns of K W and Siam Cement.

Diversification Opportunities for K W and Siam Cement

0.81

Correlation Coefficient

K W  Siam Cement

Very poor diversification

The 3 months correlation between KWM and Siam is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding K W Metal and The Siam Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siam Cement and K W 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 K W Metal are associated (or correlated) with Siam Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siam Cement has no effect on the direction of K W i.e., K W and Siam Cement go up and down completely randomly.

Pair Corralation between K W and Siam Cement

Assuming the 90 days trading horizon K W Metal is expected to generate 0.75 times more return on investment than Siam Cement. However, K W Metal is 1.33 times less risky than Siam Cement. It trades about -0.04 of its potential returns per unit of risk. The Siam Cement is currently generating about -0.27 per unit of risk. If you would invest  134.00  in K W Metal on September 13, 2024 and sell it today you would lose (6.00) from holding K W Metal or give up 4.48% of portfolio value over 90 days.

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

K W Metal  vs.  The Siam Cement

K W Metal

Risk-Adjusted Performance

0 of 100

Very Weak

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

Siam Cement

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Siam Cement 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 indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with K W and Siam Cement

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

The idea behind K W Metal and The Siam Cement 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.