Correlation Between TMC Industrial and SET100 Index

Can any of the company-specific risk be diversified away by investing in both TMC Industrial and SET100 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 TMC Industrial and SET100 Index into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TMC Industrial Public and SET100 Index, you can compare the effects of market volatilities on TMC Industrial and SET100 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 TMC Industrial with a short position of SET100 Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of TMC Industrial and SET100 Index.

Diversification Opportunities for TMC Industrial and SET100 Index

0.68

Correlation Coefficient

TMC Industrial  SET100 Index

Poor diversification

The 3 months correlation between TMC and SET100 is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding TMC Industrial Public and SET100 Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SET100 Index and TMC 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 TMC Industrial Public are associated (or correlated) with SET100 Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SET100 Index has no effect on the direction of TMC Industrial i.e., TMC Industrial and SET100 Index go up and down completely randomly.

Pair Corralation between TMC Industrial and SET100 Index

Assuming the 90 days trading horizon TMC Industrial Public is expected to under-perform the SET100 Index. In addition to that, TMC Industrial is 4.52 times more volatile than SET100 Index. It trades about -0.07 of its total potential returns per unit of risk. SET100 Index is currently generating about 0.02 per unit of volatility. If you would invest  190,786  in SET100 Index on October 10, 2024 and sell it today you would earn a total of  4,307  from holding SET100 Index or generate 2.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.17%
Values	Daily Returns

TMC Industrial Public  vs.  SET100 Index

Pair Trading with TMC Industrial and SET100 Index

The main advantage of trading using opposite TMC Industrial and SET100 Index positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TMC Industrial position performs unexpectedly, SET100 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 SET100 Index will offset losses from the drop in SET100 Index's long position.

The idea behind TMC Industrial Public and SET100 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.

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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.