Correlation Between Rayong Wire and POSCO Thainox

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

By analyzing existing cross correlation between Rayong Wire Industries and POSCO Thainox Public, you can compare the effects of market volatilities on Rayong Wire and POSCO Thainox 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 Rayong Wire with a short position of POSCO Thainox. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rayong Wire and POSCO Thainox.

Diversification Opportunities for Rayong Wire and POSCO Thainox

0.24

Correlation Coefficient

Rayong Wire  POSCO Thainox

Modest diversification

The 3 months correlation between Rayong and POSCO is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Rayong Wire Industries and POSCO Thainox Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POSCO Thainox Public and Rayong Wire 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 Rayong Wire Industries are associated (or correlated) with POSCO Thainox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POSCO Thainox Public has no effect on the direction of Rayong Wire i.e., Rayong Wire and POSCO Thainox go up and down completely randomly.

Pair Corralation between Rayong Wire and POSCO Thainox

Assuming the 90 days trading horizon Rayong Wire Industries is expected to under-perform the POSCO Thainox. In addition to that, Rayong Wire is 1.43 times more volatile than POSCO Thainox Public. It trades about -0.16 of its total potential returns per unit of risk. POSCO Thainox Public is currently generating about 0.0 per unit of volatility. If you would invest  44.00  in POSCO Thainox Public on December 20, 2024 and sell it today you would lose (1.00) from holding POSCO Thainox Public or give up 2.27% of portfolio value over 90 days.

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

Rayong Wire Industries  vs.  POSCO Thainox Public

Rayong Wire Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rayong Wire Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

POSCO Thainox Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days POSCO Thainox Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, POSCO Thainox 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 Rayong Wire and POSCO Thainox

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

The idea behind Rayong Wire Industries and POSCO Thainox 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.