Correlation Between Thai Vegetable and TMT Steel

Can any of the company-specific risk be diversified away by investing in both Thai Vegetable and TMT Steel 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 Vegetable and TMT Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Thai Vegetable Oil and TMT Steel Public, you can compare the effects of market volatilities on Thai Vegetable and TMT Steel 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 Vegetable with a short position of TMT Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thai Vegetable and TMT Steel.

Diversification Opportunities for Thai Vegetable and TMT Steel

-0.05

Correlation Coefficient

Thai Vegetable  TMT Steel

Good diversification

The 3 months correlation between Thai and TMT is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Thai Vegetable Oil and TMT Steel Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TMT Steel Public and Thai Vegetable 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 Vegetable Oil are associated (or correlated) with TMT Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TMT Steel Public has no effect on the direction of Thai Vegetable i.e., Thai Vegetable and TMT Steel go up and down completely randomly.

Pair Corralation between Thai Vegetable and TMT Steel

Assuming the 90 days trading horizon Thai Vegetable is expected to generate 4.22 times less return on investment than TMT Steel. But when comparing it to its historical volatility, Thai Vegetable Oil is 1.88 times less risky than TMT Steel. It trades about 0.03 of its potential returns per unit of risk. TMT Steel Public is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  318.00  in TMT Steel Public on December 25, 2024 and sell it today you would earn a total of  28.00  from holding TMT Steel Public or generate 8.81% return on investment over 90 days.

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

Thai Vegetable Oil  vs.  TMT Steel Public

Thai Vegetable Oil

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Thai Vegetable Oil are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Thai Vegetable is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

TMT Steel Public

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TMT Steel Public are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, TMT Steel may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Thai Vegetable and TMT Steel

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

The idea behind Thai Vegetable Oil and TMT Steel 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.