Correlation Between Siam Cement and Airports

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

By analyzing existing cross correlation between The Siam Cement and Airports of Thailand, you can compare the effects of market volatilities on Siam Cement and Airports 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 Siam Cement with a short position of Airports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Siam Cement and Airports.

Diversification Opportunities for Siam Cement and Airports

0.08

Correlation Coefficient

Siam Cement  Airports

Significant diversification

The 3 months correlation between Siam and Airports is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding The Siam Cement and Airports of Thailand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airports of Thailand and Siam Cement 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 The Siam Cement are associated (or correlated) with Airports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airports of Thailand has no effect on the direction of Siam Cement i.e., Siam Cement and Airports go up and down completely randomly.

Pair Corralation between Siam Cement and Airports

Assuming the 90 days trading horizon The Siam Cement is expected to under-perform the Airports. But the stock apears to be less risky and, when comparing its historical volatility, The Siam Cement is 35.06 times less risky than Airports. The stock trades about -0.13 of its potential returns per unit of risk. The Airports of Thailand is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  7,070  in Airports of Thailand on August 30, 2024 and sell it today you would lose (920.00) from holding Airports of Thailand or give up 13.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

The Siam Cement  vs.  Airports of Thailand

Siam Cement

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Siam Cement 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 fundamental drivers remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Airports of Thailand

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Airports of Thailand are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Airports sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Siam Cement and Airports

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

The idea behind The Siam Cement and Airports of Thailand 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.