Correlation Between Kang Yong and Thai Metal

Can any of the company-specific risk be diversified away by investing in both Kang Yong and Thai Metal 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 Kang Yong and Thai Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kang Yong Electric and Thai Metal Drum, you can compare the effects of market volatilities on Kang Yong and Thai Metal 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 Kang Yong with a short position of Thai Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kang Yong and Thai Metal.

Diversification Opportunities for Kang Yong and Thai Metal

-0.19

Correlation Coefficient

Kang Yong  Thai Metal

Good diversification

The 3 months correlation between Kang and Thai is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Kang Yong Electric and Thai Metal Drum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Metal Drum and Kang Yong 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 Kang Yong Electric are associated (or correlated) with Thai Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Metal Drum has no effect on the direction of Kang Yong i.e., Kang Yong and Thai Metal go up and down completely randomly.

Pair Corralation between Kang Yong and Thai Metal

Assuming the 90 days trading horizon Kang Yong is expected to generate 12935.08 times less return on investment than Thai Metal. But when comparing it to its historical volatility, Kang Yong Electric is 270.17 times less risky than Thai Metal. It trades about 0.0 of its potential returns per unit of risk. Thai Metal Drum is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,430  in Thai Metal Drum on October 5, 2024 and sell it today you would earn a total of  0.00  from holding Thai Metal Drum or generate 0.0% return on investment over 90 days.

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

Kang Yong Electric  vs.  Thai Metal Drum

Kang Yong Electric

Risk-Adjusted Performance

0 of 100

Very Weak

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

Thai Metal Drum

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Thai Metal Drum are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, Thai Metal disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kang Yong and Thai Metal

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

The idea behind Kang Yong Electric and Thai Metal Drum 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.