Correlation Between Thai Industrial and WHA Premium

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

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

Diversification Opportunities for Thai Industrial and WHA Premium

0.26

Correlation Coefficient

Thai Industrial  WHA Premium

Modest diversification

The 3 months correlation between Thai and WHA is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Thai Industrial and WHA Premium Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WHA Premium Growth and Thai Industrial 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 Industrial are associated (or correlated) with WHA Premium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WHA Premium Growth has no effect on the direction of Thai Industrial i.e., Thai Industrial and WHA Premium go up and down completely randomly.

Pair Corralation between Thai Industrial and WHA Premium

Assuming the 90 days trading horizon Thai Industrial is expected to generate 59.11 times more return on investment than WHA Premium. However, Thai Industrial is 59.11 times more volatile than WHA Premium Growth. It trades about 0.08 of its potential returns per unit of risk. WHA Premium Growth is currently generating about 0.16 per unit of risk. If you would invest  775.00  in Thai Industrial on September 15, 2024 and sell it today you would lose (15.00) from holding Thai Industrial or give up 1.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.19%
Values	Daily Returns

Thai Industrial  vs.  WHA Premium Growth

Thai Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

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

WHA Premium Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WHA Premium Growth has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, WHA Premium is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Thai Industrial and WHA Premium

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

The idea behind Thai Industrial and WHA Premium Growth 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.