Correlation Between Thai Film and Thai Metal

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

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

Diversification Opportunities for Thai Film and Thai Metal

0.0

Correlation Coefficient

Thai Film  Thai Metal

Pay attention - limited upside

The 3 months correlation between Thai and Thai is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Thai Film Industries and Thai Metal Drum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Metal Drum and Thai Film 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 Thai Film Industries are associated (or correlated) with Thai Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Metal Drum has no effect on the direction of Thai Film i.e., Thai Film and Thai Metal go up and down completely randomly.

Pair Corralation between Thai Film and Thai Metal

Assuming the 90 days trading horizon Thai Film is expected to generate 25.34 times less return on investment than Thai Metal. But when comparing it to its historical volatility, Thai Film Industries is 15.02 times less risky than Thai Metal. It trades about 0.07 of its potential returns per unit of risk. Thai Metal Drum is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,460  in Thai Metal Drum on September 5, 2024 and sell it today you would lose (30.00) from holding Thai Metal Drum or give up 1.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Thai Film Industries  vs.  Thai Metal Drum

Thai Film Industries

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Thai Film Industries are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward indicators, Thai Film disclosed solid returns over the last few months and may actually be approaching a breakup point.

Thai Metal Drum

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Thai Metal Drum are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, Thai Metal disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Thai Film and Thai Metal

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

The idea behind Thai Film Industries and Thai Metal Drum 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.