Correlation Between Thai Metal and Thai Packaging

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

Diversification Opportunities for Thai Metal and Thai Packaging

0.98

Correlation Coefficient

Thai Metal  Thai Packaging

Almost no diversification

The 3 months correlation between Thai and Thai is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Thai Metal Drum and Thai Packaging Printing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Packaging Printing 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 Packaging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Packaging Printing has no effect on the direction of Thai Metal i.e., Thai Metal and Thai Packaging go up and down completely randomly.

Pair Corralation between Thai Metal and Thai Packaging

Assuming the 90 days trading horizon Thai Metal Drum is expected to generate 1.0 times more return on investment than Thai Packaging. However, Thai Metal is 1.0 times more volatile than Thai Packaging Printing. It trades about 0.07 of its potential returns per unit of risk. Thai Packaging Printing is currently generating about 0.07 per unit of risk. If you would invest  2,324  in Thai Metal Drum on September 12, 2024 and sell it today you would earn a total of  136.00  from holding Thai Metal Drum or generate 5.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.06%
Values	Daily Returns

Thai Metal Drum  vs.  Thai Packaging Printing

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 Packaging Printing

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Thai Packaging Printing are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Thai Packaging disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Thai Metal and Thai Packaging

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

The idea behind Thai Metal Drum and Thai Packaging Printing 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.