Correlation Between SET100 Index and Bangkok Sheet

Can any of the company-specific risk be diversified away by investing in both SET100 Index and Bangkok Sheet 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 SET100 Index and Bangkok Sheet into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SET100 Index and Bangkok Sheet Metal, you can compare the effects of market volatilities on SET100 Index and Bangkok Sheet 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 SET100 Index with a short position of Bangkok Sheet. Check out your portfolio center. Please also check ongoing floating volatility patterns of SET100 Index and Bangkok Sheet.

Diversification Opportunities for SET100 Index and Bangkok Sheet

0.43

Correlation Coefficient

SET100 Index  Bangkok Sheet

Very weak diversification

The 3 months correlation between SET100 and Bangkok is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding SET100 Index and Bangkok Sheet Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bangkok Sheet Metal and SET100 Index 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 SET100 Index are associated (or correlated) with Bangkok Sheet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bangkok Sheet Metal has no effect on the direction of SET100 Index i.e., SET100 Index and Bangkok Sheet go up and down completely randomly.

Pair Corralation between SET100 Index and Bangkok Sheet

Assuming the 90 days trading horizon SET100 Index is expected to under-perform the Bangkok Sheet. But the index apears to be less risky and, when comparing its historical volatility, SET100 Index is 1.7 times less risky than Bangkok Sheet. The index trades about -0.23 of its potential returns per unit of risk. The Bangkok Sheet Metal is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  301.00  in Bangkok Sheet Metal on December 24, 2024 and sell it today you would lose (27.00) from holding Bangkok Sheet Metal or give up 8.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

SET100 Index  vs.  Bangkok Sheet Metal

Pair Trading with SET100 Index and Bangkok Sheet

The main advantage of trading using opposite SET100 Index and Bangkok Sheet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SET100 Index position performs unexpectedly, Bangkok Sheet 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 Bangkok Sheet will offset losses from the drop in Bangkok Sheet's long position.

The idea behind SET100 Index and Bangkok Sheet Metal 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.