Correlation Between Thai Metal and Thai Poly

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

Diversification Opportunities for Thai Metal and Thai Poly

-0.12

Correlation Coefficient

Thai Metal  Thai Poly

Good diversification

The 3 months correlation between Thai and Thai is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Thai Metal Drum and Thai Poly Acrylic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Poly Acrylic 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 Thai Poly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Poly Acrylic has no effect on the direction of Thai Metal i.e., Thai Metal and Thai Poly go up and down completely randomly.

Pair Corralation between Thai Metal and Thai Poly

Assuming the 90 days trading horizon Thai Metal is expected to generate 3.64 times less return on investment than Thai Poly. But when comparing it to its historical volatility, Thai Metal Drum is 6.63 times less risky than Thai Poly. It trades about 0.07 of its potential returns per unit of risk. Thai Poly Acrylic is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  360.00  in Thai Poly Acrylic on October 11, 2024 and sell it today you would earn a total of  2.00  from holding Thai Poly Acrylic or generate 0.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Thai Metal Drum  vs.  Thai Poly Acrylic

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.

Thai Poly Acrylic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thai Poly Acrylic has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Thai Metal and Thai Poly

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

The idea behind Thai Metal Drum and Thai Poly Acrylic 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.