Correlation Between Thai Oil and Dcon Products

Can any of the company-specific risk be diversified away by investing in both Thai Oil and Dcon Products 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 Oil and Dcon Products into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Thai Oil Public and Dcon Products Public, you can compare the effects of market volatilities on Thai Oil and Dcon Products 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 Oil with a short position of Dcon Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thai Oil and Dcon Products.

Diversification Opportunities for Thai Oil and Dcon Products

0.32

Correlation Coefficient

Thai Oil  Dcon Products

Weak diversification

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

Pair Corralation between Thai Oil and Dcon Products

Assuming the 90 days trading horizon Thai Oil Public is expected to generate 1.41 times more return on investment than Dcon Products. However, Thai Oil is 1.41 times more volatile than Dcon Products Public. It trades about 0.07 of its potential returns per unit of risk. Dcon Products Public is currently generating about 0.05 per unit of risk. If you would invest  4,625  in Thai Oil Public on September 24, 2024 and sell it today you would lose (1,125) from holding Thai Oil Public or give up 24.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.64%
Values	Daily Returns

Thai Oil Public  vs.  Dcon Products Public

Thai Oil Public

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Thai Oil Public are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental drivers, Thai Oil sustained solid returns over the last few months and may actually be approaching a breakup point.

Dcon Products Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dcon Products Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Thai Oil and Dcon Products

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

The idea behind Thai Oil Public and Dcon Products Public 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.