Correlation Between Thailand Prime and Quality Houses

Can any of the company-specific risk be diversified away by investing in both Thailand Prime and Quality Houses 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 Thailand Prime and Quality Houses into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Thailand Prime Property and Quality Houses Property, you can compare the effects of market volatilities on Thailand Prime and Quality Houses 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 Thailand Prime with a short position of Quality Houses. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thailand Prime and Quality Houses.

Diversification Opportunities for Thailand Prime and Quality Houses

0.77

Correlation Coefficient

Thailand Prime  Quality Houses

Poor diversification

The 3 months correlation between Thailand and Quality is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Thailand Prime Property and Quality Houses Property in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quality Houses Property and Thailand Prime 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 Thailand Prime Property are associated (or correlated) with Quality Houses. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quality Houses Property has no effect on the direction of Thailand Prime i.e., Thailand Prime and Quality Houses go up and down completely randomly.

Pair Corralation between Thailand Prime and Quality Houses

Assuming the 90 days trading horizon Thailand Prime Property is expected to generate 1.23 times more return on investment than Quality Houses. However, Thailand Prime is 1.23 times more volatile than Quality Houses Property. It trades about 0.17 of its potential returns per unit of risk. Quality Houses Property is currently generating about 0.09 per unit of risk. If you would invest  622.00  in Thailand Prime Property on September 5, 2024 and sell it today you would earn a total of  178.00  from holding Thailand Prime Property or generate 28.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Thailand Prime Property  vs.  Quality Houses Property

Thailand Prime Property

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Thailand Prime Property are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Thailand Prime sustained solid returns over the last few months and may actually be approaching a breakup point.

Quality Houses Property

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Quality Houses Property are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. Despite quite conflicting forward-looking signals, Quality Houses may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Thailand Prime and Quality Houses

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

The idea behind Thailand Prime Property and Quality Houses Property 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.