Correlation Between Siam Cement and Ananda Development

Can any of the company-specific risk be diversified away by investing in both Siam Cement and Ananda Development 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 Ananda Development 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 Ananda Development Public, you can compare the effects of market volatilities on Siam Cement and Ananda Development 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 Ananda Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Siam Cement and Ananda Development.

Diversification Opportunities for Siam Cement and Ananda Development

0.77

Correlation Coefficient

Siam Cement  Ananda Development

Poor diversification

The 3 months correlation between Siam and Ananda is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding The Siam Cement and Ananda Development Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ananda Development Public 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 Ananda Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ananda Development Public has no effect on the direction of Siam Cement i.e., Siam Cement and Ananda Development go up and down completely randomly.

Pair Corralation between Siam Cement and Ananda Development

Assuming the 90 days trading horizon Siam Cement is expected to generate 180.13 times less return on investment than Ananda Development. But when comparing it to its historical volatility, The Siam Cement is 1.88 times less risky than Ananda Development. It trades about 0.0 of its potential returns per unit of risk. Ananda Development Public is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  58.00  in Ananda Development Public on December 22, 2024 and sell it today you would earn a total of  5.00  from holding Ananda Development Public or generate 8.62% return on investment over 90 days.

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

The Siam Cement  vs.  Ananda Development Public

Siam Cement

Risk-Adjusted Performance

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 quite persistent fundamental indicators, Siam Cement is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Ananda Development Public

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ananda Development Public are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Ananda Development disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Siam Cement and Ananda Development

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

The idea behind The Siam Cement and Ananda Development 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.