Correlation Between Thai Oil and GULF ENERGY

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

Diversification Opportunities for Thai Oil and GULF ENERGY

-0.44

Correlation Coefficient

Thai Oil  GULF ENERGY

Very good diversification

The 3 months correlation between Thai and GULF is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Thai Oil Public and GULF ENERGY DEVELOPMENT NVDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GULF ENERGY DEVELOPMENT 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 GULF ENERGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GULF ENERGY DEVELOPMENT has no effect on the direction of Thai Oil i.e., Thai Oil and GULF ENERGY go up and down completely randomly.

Pair Corralation between Thai Oil and GULF ENERGY

Assuming the 90 days trading horizon Thai Oil Public is expected to generate 33.76 times more return on investment than GULF ENERGY. However, Thai Oil is 33.76 times more volatile than GULF ENERGY DEVELOPMENT NVDR. It trades about 0.12 of its potential returns per unit of risk. GULF ENERGY DEVELOPMENT NVDR is currently generating about 0.1 per unit of risk. If you would invest  4,625  in Thai Oil Public on October 12, 2024 and sell it today you would lose (800.00) from holding Thai Oil Public or give up 17.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	91.38%
Values	Daily Returns

Thai Oil Public  vs.  GULF ENERGY DEVELOPMENT NVDR

Thai Oil Public

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Thai Oil Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak fundamental drivers, Thai Oil sustained solid returns over the last few months and may actually be approaching a breakup point.

GULF ENERGY DEVELOPMENT

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GULF ENERGY DEVELOPMENT NVDR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, GULF ENERGY sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Thai Oil and GULF ENERGY

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

The idea behind Thai Oil Public and GULF ENERGY DEVELOPMENT NVDR 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.