Correlation Between Muang Thai and DOHOME

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

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

Diversification Opportunities for Muang Thai and DOHOME

0.56

Correlation Coefficient

Muang Thai  DOHOME

Very weak diversification

The 3 months correlation between Muang and DOHOME is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Muang Thai Insurance and DOHOME in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DOHOME and Muang Thai 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 Muang Thai Insurance are associated (or correlated) with DOHOME. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOHOME has no effect on the direction of Muang Thai i.e., Muang Thai and DOHOME go up and down completely randomly.

Pair Corralation between Muang Thai and DOHOME

Assuming the 90 days trading horizon Muang Thai Insurance is expected to generate 0.5 times more return on investment than DOHOME. However, Muang Thai Insurance is 2.02 times less risky than DOHOME. It trades about -0.06 of its potential returns per unit of risk. DOHOME is currently generating about -0.34 per unit of risk. If you would invest  10,600  in Muang Thai Insurance on October 8, 2024 and sell it today you would lose (100.00) from holding Muang Thai Insurance or give up 0.94% of portfolio value over 90 days.

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

Muang Thai Insurance  vs.  DOHOME

Muang Thai Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

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

DOHOME

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DOHOME 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 primary indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Muang Thai and DOHOME

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

The idea behind Muang Thai Insurance and DOHOME 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.