Correlation Between Thai Oil and Star Petroleum

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

Diversification Opportunities for Thai Oil and Star Petroleum

-0.07

Correlation Coefficient

Thai Oil  Star Petroleum

Good diversification

The 3 months correlation between Thai and Star is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Thai Oil Public and Star Petroleum Refining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Star Petroleum Refining 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 Star Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Star Petroleum Refining has no effect on the direction of Thai Oil i.e., Thai Oil and Star Petroleum go up and down completely randomly.

Pair Corralation between Thai Oil and Star Petroleum

Assuming the 90 days trading horizon Thai Oil Public is expected to generate 83.5 times more return on investment than Star Petroleum. However, Thai Oil is 83.5 times more volatile than Star Petroleum Refining. It trades about 0.17 of its potential returns per unit of risk. Star Petroleum Refining is currently generating about -0.01 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Thai Oil Public  vs.  Star Petroleum Refining

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.

Star Petroleum Refining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Star Petroleum Refining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Star Petroleum is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Thai Oil and Star Petroleum

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

The idea behind Thai Oil Public and Star Petroleum Refining 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.