Correlation Between Siam City and Premier Marketing

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

Diversification Opportunities for Siam City and Premier Marketing

-0.19

Correlation Coefficient

Siam City  Premier Marketing

Good diversification

The 3 months correlation between Siam and Premier is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Siam City Cement and Premier Marketing Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier Marketing Public 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 Premier Marketing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Marketing Public has no effect on the direction of Siam City i.e., Siam City and Premier Marketing go up and down completely randomly.

Pair Corralation between Siam City and Premier Marketing

Assuming the 90 days trading horizon Siam City Cement is expected to generate 0.8 times more return on investment than Premier Marketing. However, Siam City Cement is 1.24 times less risky than Premier Marketing. It trades about 0.09 of its potential returns per unit of risk. Premier Marketing Public is currently generating about 0.05 per unit of risk. If you would invest  12,565  in Siam City Cement on October 7, 2024 and sell it today you would earn a total of  3,735  from holding Siam City Cement or generate 29.73% return on investment over 90 days.

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

Siam City Cement  vs.  Premier Marketing Public

Siam City Cement

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Siam City Cement has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Siam City is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Premier Marketing Public

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Premier Marketing Public are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Premier Marketing 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 City and Premier Marketing

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

The idea behind Siam City Cement and Premier Marketing 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.