Correlation Between Stock Exchange and Thai President

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

By analyzing existing cross correlation between Stock Exchange Of and Thai President Foods, you can compare the effects of market volatilities on Stock Exchange and Thai President 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 Stock Exchange with a short position of Thai President. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stock Exchange and Thai President.

Diversification Opportunities for Stock Exchange and Thai President

-0.3

Correlation Coefficient

Stock Exchange  Thai President

Very good diversification

The 3 months correlation between Stock and Thai is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Stock Exchange Of and Thai President Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai President Foods and Stock Exchange 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 Stock Exchange Of are associated (or correlated) with Thai President. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai President Foods has no effect on the direction of Stock Exchange i.e., Stock Exchange and Thai President go up and down completely randomly.

Pair Corralation between Stock Exchange and Thai President

Assuming the 90 days trading horizon Stock Exchange Of is expected to under-perform the Thai President. In addition to that, Stock Exchange is 2.25 times more volatile than Thai President Foods. It trades about -0.26 of its total potential returns per unit of risk. Thai President Foods is currently generating about 0.01 per unit of volatility. If you would invest  19,950  in Thai President Foods on December 30, 2024 and sell it today you would earn a total of  50.00  from holding Thai President Foods or generate 0.25% return on investment over 90 days.

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

Stock Exchange Of  vs.  Thai President Foods

Pair Trading with Stock Exchange and Thai President

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

The idea behind Stock Exchange Of and Thai President Foods 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.