Correlation Between Thai Oil and IRPC Public

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

Diversification Opportunities for Thai Oil and IRPC Public

0.6

Correlation Coefficient

Thai Oil  IRPC Public

Poor diversification

The 3 months correlation between Thai and IRPC is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Thai Oil Public and IRPC Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IRPC 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 IRPC Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IRPC Public has no effect on the direction of Thai Oil i.e., Thai Oil and IRPC Public go up and down completely randomly.

Pair Corralation between Thai Oil and IRPC Public

Assuming the 90 days trading horizon Thai Oil Public is expected to generate 1.41 times more return on investment than IRPC Public. However, Thai Oil is 1.41 times more volatile than IRPC Public. It trades about 0.17 of its potential returns per unit of risk. IRPC Public is currently generating about 0.13 per unit of risk. If you would invest  0.00  in Thai Oil Public on September 3, 2024 and sell it today you would earn a total of  3,775  from holding Thai Oil Public or generate 9.223372036854776E16% return on investment over 90 days.

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

Thai Oil Public  vs.  IRPC Public

Thai Oil Public

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Thai Oil Public are ranked lower than 13 (%) 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.

IRPC Public

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Thai Oil and IRPC Public

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

The idea behind Thai Oil Public and IRPC 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.

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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.