Correlation Between Pan Asia and Samchai Steel

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

By analyzing existing cross correlation between Pan Asia Footwear and Samchai Steel Industries, you can compare the effects of market volatilities on Pan Asia and Samchai Steel 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 Pan Asia with a short position of Samchai Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pan Asia and Samchai Steel.

Diversification Opportunities for Pan Asia and Samchai Steel

-0.53

Correlation Coefficient

Pan Asia  Samchai Steel

Excellent diversification

The 3 months correlation between Pan and Samchai is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Pan Asia Footwear and Samchai Steel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samchai Steel Industries and Pan Asia 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 Pan Asia Footwear are associated (or correlated) with Samchai Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samchai Steel Industries has no effect on the direction of Pan Asia i.e., Pan Asia and Samchai Steel go up and down completely randomly.

Pair Corralation between Pan Asia and Samchai Steel

Assuming the 90 days trading horizon Pan Asia is expected to generate 1.11 times less return on investment than Samchai Steel. But when comparing it to its historical volatility, Pan Asia Footwear is 1.01 times less risky than Samchai Steel. It trades about 0.05 of its potential returns per unit of risk. Samchai Steel Industries is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  40.00  in Samchai Steel Industries on October 6, 2024 and sell it today you would lose (19.00) from holding Samchai Steel Industries or give up 47.5% of portfolio value over 90 days.

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

Pan Asia Footwear  vs.  Samchai Steel Industries

Pan Asia Footwear

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pan Asia Footwear 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 technical and fundamental indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Samchai Steel Industries

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Samchai Steel Industries are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting primary indicators, Samchai Steel disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pan Asia and Samchai Steel

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

The idea behind Pan Asia Footwear and Samchai Steel Industries 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..