Correlation Between STMICROELECTRONICS and PTT Global

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

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

Diversification Opportunities for STMICROELECTRONICS and PTT Global

0.45

Correlation Coefficient

STMICROELECTRONICS  PTT Global

Very weak diversification

The 3 months correlation between STMICROELECTRONICS and PTT is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding STMICROELECTRONICS and PTT Global Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PTT Global Chemical and STMICROELECTRONICS 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 STMICROELECTRONICS are associated (or correlated) with PTT Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PTT Global Chemical has no effect on the direction of STMICROELECTRONICS i.e., STMICROELECTRONICS and PTT Global go up and down completely randomly.

Pair Corralation between STMICROELECTRONICS and PTT Global

Assuming the 90 days trading horizon STMICROELECTRONICS is expected to under-perform the PTT Global. But the stock apears to be less risky and, when comparing its historical volatility, STMICROELECTRONICS is 8.18 times less risky than PTT Global. The stock trades about -0.03 of its potential returns per unit of risk. The PTT Global Chemical is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  107.00  in PTT Global Chemical on October 4, 2024 and sell it today you would lose (43.00) from holding PTT Global Chemical or give up 40.19% of portfolio value over 90 days.

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

STMICROELECTRONICS  vs.  PTT Global Chemical

STMICROELECTRONICS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STMICROELECTRONICS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, STMICROELECTRONICS is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

PTT Global Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PTT Global Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with STMICROELECTRONICS and PTT Global

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

The idea behind STMICROELECTRONICS and PTT Global Chemical 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.