Correlation Between Thai Metal and Central Retail

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

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

Diversification Opportunities for Thai Metal and Central Retail

-0.58

Correlation Coefficient

Thai Metal  Central Retail

Excellent diversification

The 3 months correlation between Thai and Central is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Thai Metal Drum and Central Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Retail and Thai Metal 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 Metal Drum are associated (or correlated) with Central Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Retail has no effect on the direction of Thai Metal i.e., Thai Metal and Central Retail go up and down completely randomly.

Pair Corralation between Thai Metal and Central Retail

Assuming the 90 days trading horizon Thai Metal Drum is expected to generate 0.98 times more return on investment than Central Retail. However, Thai Metal Drum is 1.02 times less risky than Central Retail. It trades about 0.04 of its potential returns per unit of risk. Central Retail is currently generating about -0.17 per unit of risk. If you would invest  2,334  in Thai Metal Drum on December 30, 2024 and sell it today you would earn a total of  116.00  from holding Thai Metal Drum or generate 4.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Thai Metal Drum  vs.  Central Retail

Thai Metal Drum

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Thai Metal Drum are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, Thai Metal may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Central Retail

Risk-Adjusted Performance

Very Weak

Over the last 90 days Central Retail 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 fundamental indicators 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 Thai Metal and Central Retail

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

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