Correlation Between Siam City and Siam Cement

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

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

Diversification Opportunities for Siam City and Siam Cement

0.13

Correlation Coefficient

Siam City  Siam Cement

Average diversification

The 3 months correlation between Siam and Siam is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Siam City Cement and The Siam Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siam Cement and Siam City 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 Siam City Cement are associated (or correlated) with Siam Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siam Cement has no effect on the direction of Siam City i.e., Siam City and Siam Cement go up and down completely randomly.

Pair Corralation between Siam City and Siam Cement

Assuming the 90 days trading horizon Siam City Cement is expected to generate 0.43 times more return on investment than Siam Cement. However, Siam City Cement is 2.34 times less risky than Siam Cement. It trades about 0.1 of its potential returns per unit of risk. The Siam Cement is currently generating about -0.01 per unit of risk. If you would invest  14,650  in Siam City Cement on December 22, 2024 and sell it today you would earn a total of  1,250  from holding Siam City Cement or generate 8.53% return on investment over 90 days.

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

Siam City Cement  vs.  The Siam Cement

Siam City Cement

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Siam City Cement are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Siam City may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 somewhat strong fundamental drivers, Siam Cement is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Siam City and Siam Cement

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

The idea behind Siam City Cement and The Siam Cement 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.