Correlation Between Thai Metal and Dhouse Pattana

Can any of the company-specific risk be diversified away by investing in both Thai Metal and Dhouse Pattana 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 Dhouse Pattana 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 Dhouse Pattana Public, you can compare the effects of market volatilities on Thai Metal and Dhouse Pattana 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 Dhouse Pattana. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thai Metal and Dhouse Pattana.

Diversification Opportunities for Thai Metal and Dhouse Pattana

0.03

Correlation Coefficient

Thai Metal  Dhouse Pattana

Significant diversification

The 3 months correlation between Thai and Dhouse is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Thai Metal Drum and Dhouse Pattana Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dhouse Pattana Public 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 Dhouse Pattana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dhouse Pattana Public has no effect on the direction of Thai Metal i.e., Thai Metal and Dhouse Pattana go up and down completely randomly.

Pair Corralation between Thai Metal and Dhouse Pattana

Assuming the 90 days trading horizon Thai Metal Drum is expected to generate 35.87 times more return on investment than Dhouse Pattana. However, Thai Metal is 35.87 times more volatile than Dhouse Pattana Public. It trades about 0.08 of its potential returns per unit of risk. Dhouse Pattana Public is currently generating about -0.01 per unit of risk. If you would invest  2,268  in Thai Metal Drum on October 5, 2024 and sell it today you would earn a total of  162.00  from holding Thai Metal Drum or generate 7.14% return on investment over 90 days.

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

Thai Metal Drum  vs.  Dhouse Pattana Public

Thai Metal Drum

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Thai Metal Drum are ranked lower than 9 (%) 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.

Dhouse Pattana Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dhouse Pattana Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Dhouse Pattana 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 Metal and Dhouse Pattana

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

The idea behind Thai Metal Drum and Dhouse Pattana Public 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.