Correlation Between Thai Metal and Heng Leasing

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

Diversification Opportunities for Thai Metal and Heng Leasing

0.32

Correlation Coefficient

Thai Metal  Heng Leasing

Weak diversification

The 3 months correlation between Thai and Heng is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Thai Metal Drum and Heng Leasing Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heng Leasing Capital 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 Heng Leasing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heng Leasing Capital has no effect on the direction of Thai Metal i.e., Thai Metal and Heng Leasing go up and down completely randomly.

Pair Corralation between Thai Metal and Heng Leasing

Assuming the 90 days trading horizon Thai Metal Drum is expected to generate 1.17 times more return on investment than Heng Leasing. However, Thai Metal is 1.17 times more volatile than Heng Leasing Capital. It trades about 0.04 of its potential returns per unit of risk. Heng Leasing Capital is currently generating about -0.01 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 Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Thai Metal Drum  vs.  Heng Leasing Capital

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.

Heng Leasing Capital

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Thai Metal and Heng Leasing

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

The idea behind Thai Metal Drum and Heng Leasing Capital 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.