Correlation Between Siam Cement and Metro Systems

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

Diversification Opportunities for Siam Cement and Metro Systems

0.8

Correlation Coefficient

Siam Cement  Metro Systems

Very poor diversification

The 3 months correlation between Siam and Metro is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding The Siam Cement and Metro Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro Systems 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 Metro Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro Systems has no effect on the direction of Siam Cement i.e., Siam Cement and Metro Systems go up and down completely randomly.

Pair Corralation between Siam Cement and Metro Systems

Assuming the 90 days trading horizon The Siam Cement is expected to under-perform the Metro Systems. But the stock apears to be less risky and, when comparing its historical volatility, The Siam Cement is 34.3 times less risky than Metro Systems. The stock trades about -0.09 of its potential returns per unit of risk. The Metro Systems is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  869.00  in Metro Systems on September 13, 2024 and sell it today you would lose (79.00) from holding Metro Systems or give up 9.09% of portfolio value over 90 days.

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

The Siam Cement  vs.  Metro Systems

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 conflicting performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Metro Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metro Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Metro Systems 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 Siam Cement and Metro Systems

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

The idea behind The Siam Cement and Metro Systems 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.