Correlation Between Siam Cement and PTT Exploration

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

Diversification Opportunities for Siam Cement and PTT Exploration

0.8

Correlation Coefficient

Siam Cement  PTT Exploration

Very poor diversification

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

Pair Corralation between Siam Cement and PTT Exploration

Assuming the 90 days trading horizon The Siam Cement is expected to under-perform the PTT Exploration. But the stock apears to be less risky and, when comparing its historical volatility, The Siam Cement is 1.1 times less risky than PTT Exploration. The stock trades about -0.08 of its potential returns per unit of risk. The PTT Exploration and is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  15,471  in PTT Exploration and on September 1, 2024 and sell it today you would lose (2,721) from holding PTT Exploration and or give up 17.59% 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.  PTT Exploration and

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 abnormal performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

PTT Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PTT Exploration and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Siam Cement and PTT Exploration

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

The idea behind The Siam Cement and PTT Exploration and 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.

Check out your portfolio center.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.