Correlation Between Silicon Craft and SET50 Index

Can any of the company-specific risk be diversified away by investing in both Silicon Craft and SET50 Index 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 Silicon Craft and SET50 Index into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Silicon Craft Technology and SET50 Index, you can compare the effects of market volatilities on Silicon Craft and SET50 Index 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 Silicon Craft with a short position of SET50 Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of Silicon Craft and SET50 Index.

Diversification Opportunities for Silicon Craft and SET50 Index

0.42

Correlation Coefficient

Silicon Craft  SET50 Index

Very weak diversification

The 3 months correlation between Silicon and SET50 is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Silicon Craft Technology and SET50 Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SET50 Index and Silicon Craft 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 Silicon Craft Technology are associated (or correlated) with SET50 Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SET50 Index has no effect on the direction of Silicon Craft i.e., Silicon Craft and SET50 Index go up and down completely randomly.

Pair Corralation between Silicon Craft and SET50 Index

Assuming the 90 days trading horizon Silicon Craft Technology is expected to under-perform the SET50 Index. In addition to that, Silicon Craft is 3.08 times more volatile than SET50 Index. It trades about -0.09 of its total potential returns per unit of risk. SET50 Index is currently generating about -0.01 per unit of volatility. If you would invest  91,928  in SET50 Index on October 22, 2024 and sell it today you would lose (4,327) from holding SET50 Index or give up 4.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.22%
Values	Daily Returns

Silicon Craft Technology  vs.  SET50 Index

Pair Trading with Silicon Craft and SET50 Index

The main advantage of trading using opposite Silicon Craft and SET50 Index positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Silicon Craft position performs unexpectedly, SET50 Index 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 SET50 Index will offset losses from the drop in SET50 Index's long position.

The idea behind Silicon Craft Technology and SET50 Index 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.