Correlation Between SET Total and CPR Gomu

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

By analyzing existing cross correlation between SET Total Return and CPR Gomu Industrial, you can compare the effects of market volatilities on SET Total and CPR Gomu 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 SET Total with a short position of CPR Gomu. Check out your portfolio center. Please also check ongoing floating volatility patterns of SET Total and CPR Gomu.

Diversification Opportunities for SET Total and CPR Gomu

0.91

Correlation Coefficient

SET Total  CPR Gomu

Almost no diversification

The 3 months correlation between SET and CPR is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding SET Total Return and CPR Gomu Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPR Gomu Industrial and SET Total 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 SET Total Return are associated (or correlated) with CPR Gomu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPR Gomu Industrial has no effect on the direction of SET Total i.e., SET Total and CPR Gomu go up and down completely randomly.

Pair Corralation between SET Total and CPR Gomu

Assuming the 90 days trading horizon SET Total Return is expected to under-perform the CPR Gomu. But the index apears to be less risky and, when comparing its historical volatility, SET Total Return is 1.94 times less risky than CPR Gomu. The index trades about -0.21 of its potential returns per unit of risk. The CPR Gomu Industrial is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  308.00  in CPR Gomu Industrial on December 21, 2024 and sell it today you would lose (26.00) from holding CPR Gomu Industrial or give up 8.44% of portfolio value over 90 days.

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

SET Total Return  vs.  CPR Gomu Industrial

Pair Trading with SET Total and CPR Gomu

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

The idea behind SET Total Return and CPR Gomu Industrial 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.