Correlation Between Regional Container and Thai Nam

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

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

Diversification Opportunities for Regional Container and Thai Nam

0.36

Correlation Coefficient

Regional Container  Thai Nam

Weak diversification

The 3 months correlation between Regional and Thai is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Regional Container Lines and Thai Nam Plastic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Nam Plastic and Regional Container 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 Regional Container Lines are associated (or correlated) with Thai Nam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Nam Plastic has no effect on the direction of Regional Container i.e., Regional Container and Thai Nam go up and down completely randomly.

Pair Corralation between Regional Container and Thai Nam

Assuming the 90 days trading horizon Regional Container Lines is expected to under-perform the Thai Nam. But the stock apears to be less risky and, when comparing its historical volatility, Regional Container Lines is 1.31 times less risky than Thai Nam. The stock trades about -0.07 of its potential returns per unit of risk. The Thai Nam Plastic is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  90.00  in Thai Nam Plastic on December 22, 2024 and sell it today you would lose (5.00) from holding Thai Nam Plastic or give up 5.56% of portfolio value over 90 days.

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

Regional Container Lines  vs.  Thai Nam Plastic

Regional Container Lines

Risk-Adjusted Performance

Very Weak

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

Thai Nam Plastic

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Regional Container and Thai Nam

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

The idea behind Regional Container Lines and Thai Nam Plastic 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.