Correlation Between STMICROELECTRONICS and TMBThanachart Bank

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

By analyzing existing cross correlation between STMICROELECTRONICS and TMBThanachart Bank Public, you can compare the effects of market volatilities on STMICROELECTRONICS and TMBThanachart Bank 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 TMBThanachart Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMICROELECTRONICS and TMBThanachart Bank.

Diversification Opportunities for STMICROELECTRONICS and TMBThanachart Bank

0.37

Correlation Coefficient

STMICROELECTRONICS  TMBThanachart Bank

Weak diversification

The 3 months correlation between STMICROELECTRONICS and TMBThanachart is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding STMICROELECTRONICS and TMBThanachart Bank Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TMBThanachart Bank Public 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 TMBThanachart Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TMBThanachart Bank Public has no effect on the direction of STMICROELECTRONICS i.e., STMICROELECTRONICS and TMBThanachart Bank go up and down completely randomly.

Pair Corralation between STMICROELECTRONICS and TMBThanachart Bank

Assuming the 90 days trading horizon STMICROELECTRONICS is expected to under-perform the TMBThanachart Bank. But the stock apears to be less risky and, when comparing its historical volatility, STMICROELECTRONICS is 1.23 times less risky than TMBThanachart Bank. The stock trades about -0.03 of its potential returns per unit of risk. The TMBThanachart Bank Public is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  5.15  in TMBThanachart Bank Public on October 4, 2024 and sell it today you would lose (0.10) from holding TMBThanachart Bank Public or give up 1.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

STMICROELECTRONICS  vs.  TMBThanachart Bank Public

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.

TMBThanachart Bank Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TMBThanachart Bank Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, TMBThanachart Bank is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with STMICROELECTRONICS and TMBThanachart Bank

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

The idea behind STMICROELECTRONICS and TMBThanachart Bank 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.