Correlation Between Eureka Design and CIMB Thai

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

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

Diversification Opportunities for Eureka Design and CIMB Thai

-0.31

Correlation Coefficient

Eureka Design  CIMB Thai

Very good diversification

The 3 months correlation between Eureka and CIMB is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Eureka Design Public and CIMB Thai Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIMB Thai Bank and Eureka Design 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 Eureka Design Public are associated (or correlated) with CIMB Thai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIMB Thai Bank has no effect on the direction of Eureka Design i.e., Eureka Design and CIMB Thai go up and down completely randomly.

Pair Corralation between Eureka Design and CIMB Thai

Assuming the 90 days trading horizon Eureka Design Public is expected to under-perform the CIMB Thai. But the stock apears to be less risky and, when comparing its historical volatility, Eureka Design Public is 1.28 times less risky than CIMB Thai. The stock trades about -0.06 of its potential returns per unit of risk. The CIMB Thai Bank is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  45.00  in CIMB Thai Bank on December 30, 2024 and sell it today you would earn a total of  16.00  from holding CIMB Thai Bank or generate 35.56% return on investment over 90 days.

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

Eureka Design Public  vs.  CIMB Thai Bank

Eureka Design Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eureka Design Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

CIMB Thai Bank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CIMB Thai Bank are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental drivers, CIMB Thai sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eureka Design and CIMB Thai

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

The idea behind Eureka Design Public and CIMB Thai Bank 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.