Correlation Between Thai Metal and Quality Houses

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

Diversification Opportunities for Thai Metal and Quality Houses

-0.56

Correlation Coefficient

Thai Metal  Quality Houses

Excellent diversification

The 3 months correlation between Thai and Quality is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Thai Metal Drum and Quality Houses Property in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quality Houses Property 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 Quality Houses. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quality Houses Property has no effect on the direction of Thai Metal i.e., Thai Metal and Quality Houses go up and down completely randomly.

Pair Corralation between Thai Metal and Quality Houses

Assuming the 90 days trading horizon Thai Metal Drum is expected to generate 0.19 times more return on investment than Quality Houses. However, Thai Metal Drum is 5.18 times less risky than Quality Houses. It trades about 0.04 of its potential returns per unit of risk. Quality Houses Property is currently generating about -0.15 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	100.0%
Values	Daily Returns

Thai Metal Drum  vs.  Quality Houses Property

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.

Quality Houses Property

Risk-Adjusted Performance

Very Weak

Over the last 90 days Quality Houses Property has generated negative risk-adjusted returns adding no value to fund investors. Despite weak performance in the last few months, the Fund's forward-looking signals 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 fund institutional investors.

Pair Trading with Thai Metal and Quality Houses

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

The idea behind Thai Metal Drum and Quality Houses Property 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.