Correlation Between Thai Oil and TQM Public

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

Diversification Opportunities for Thai Oil and TQM Public

0.32

Correlation Coefficient

Thai Oil  TQM Public

Weak diversification

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

Pair Corralation between Thai Oil and TQM Public

Assuming the 90 days trading horizon Thai Oil Public is expected to generate 28.65 times more return on investment than TQM Public. However, Thai Oil is 28.65 times more volatile than TQM Public. It trades about 0.06 of its potential returns per unit of risk. TQM Public is currently generating about -0.03 per unit of risk. If you would invest  5,550  in Thai Oil Public on September 24, 2024 and sell it today you would lose (2,050) from holding Thai Oil Public or give up 36.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Thai Oil Public  vs.  TQM 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.

TQM Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TQM 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 primary indicators 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 TQM Public

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

The idea behind Thai Oil Public and TQM 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.