Correlation Between Tong Hua and Siam Steel

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

By analyzing existing cross correlation between Tong Hua Holding and Siam Steel International, you can compare the effects of market volatilities on Tong Hua and Siam Steel 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 Tong Hua with a short position of Siam Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tong Hua and Siam Steel.

Diversification Opportunities for Tong Hua and Siam Steel

0.55

Correlation Coefficient

Tong Hua  Siam Steel

Very weak diversification

The 3 months correlation between Tong and Siam is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Tong Hua Holding and Siam Steel International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siam Steel International and Tong Hua 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 Tong Hua Holding are associated (or correlated) with Siam Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siam Steel International has no effect on the direction of Tong Hua i.e., Tong Hua and Siam Steel go up and down completely randomly.

Pair Corralation between Tong Hua and Siam Steel

Assuming the 90 days horizon Tong Hua Holding is expected to generate 2.61 times more return on investment than Siam Steel. However, Tong Hua is 2.61 times more volatile than Siam Steel International. It trades about 0.01 of its potential returns per unit of risk. Siam Steel International is currently generating about -0.26 per unit of risk. If you would invest  69.00  in Tong Hua Holding on December 19, 2024 and sell it today you would lose (2.00) from holding Tong Hua Holding or give up 2.9% of portfolio value over 90 days.

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

Tong Hua Holding  vs.  Siam Steel International

Tong Hua Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tong Hua Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, Tong Hua is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Siam Steel International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Siam Steel International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Tong Hua and Siam Steel

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

The idea behind Tong Hua Holding and Siam Steel International 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.