Correlation Between Precious Shipping and Thai Oil

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

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

Diversification Opportunities for Precious Shipping and Thai Oil

0.4

Correlation Coefficient

Precious Shipping  Thai Oil

Very weak diversification

The 3 months correlation between Precious and Thai is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Precious Shipping Public and Thai Oil Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Oil Public and Precious Shipping 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 Precious Shipping Public are associated (or correlated) with Thai Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Oil Public has no effect on the direction of Precious Shipping i.e., Precious Shipping and Thai Oil go up and down completely randomly.

Pair Corralation between Precious Shipping and Thai Oil

Assuming the 90 days trading horizon Precious Shipping Public is expected to generate 0.86 times more return on investment than Thai Oil. However, Precious Shipping Public is 1.16 times less risky than Thai Oil. It trades about -0.02 of its potential returns per unit of risk. Thai Oil Public is currently generating about -0.03 per unit of risk. If you would invest  675.00  in Precious Shipping Public on December 30, 2024 and sell it today you would lose (35.00) from holding Precious Shipping Public or give up 5.19% of portfolio value over 90 days.

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

Precious Shipping Public  vs.  Thai Oil Public

Precious Shipping Public

Risk-Adjusted Performance

Very Weak

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

Thai Oil Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Thai Oil Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Precious Shipping and Thai Oil

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

The idea behind Precious Shipping Public and Thai Oil Public 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.