Correlation Between Thai Nam and Thai Packaging

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

Diversification Opportunities for Thai Nam and Thai Packaging

0.65

Correlation Coefficient

Thai Nam  Thai Packaging

Poor diversification

The 3 months correlation between Thai and Thai is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Thai Nam Plastic 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 Nam 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 Nam Plastic 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 Nam i.e., Thai Nam and Thai Packaging go up and down completely randomly.

Pair Corralation between Thai Nam and Thai Packaging

Assuming the 90 days trading horizon Thai Nam is expected to generate 2.1 times less return on investment than Thai Packaging. But when comparing it to its historical volatility, Thai Nam Plastic is 1.41 times less risky than Thai Packaging. It trades about 0.04 of its potential returns per unit of risk. Thai Packaging Printing is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,911  in Thai Packaging Printing on December 3, 2024 and sell it today you would lose (751.00) from holding Thai Packaging Printing or give up 39.3% of portfolio value over 90 days.

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

Thai Nam Plastic  vs.  Thai Packaging Printing

Thai Nam Plastic

Risk-Adjusted Performance

Very Weak

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

Thai Packaging Printing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Thai Packaging Printing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting 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 Nam and Thai Packaging

The main advantage of trading using opposite Thai Nam and Thai Packaging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thai Nam 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 Nam Plastic 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.