Correlation Between Central Plaza and President Automobile
Can any of the company-specific risk be diversified away by investing in both Central Plaza and President Automobile 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 Central Plaza and President Automobile into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Central Plaza Hotel and President Automobile Industries, you can compare the effects of market volatilities on Central Plaza and President Automobile 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 Central Plaza with a short position of President Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Plaza and President Automobile.
Diversification Opportunities for Central Plaza and President Automobile
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Central and President is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Central Plaza Hotel and President Automobile Industrie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on President Automobile and Central Plaza 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 Central Plaza Hotel are associated (or correlated) with President Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of President Automobile has no effect on the direction of Central Plaza i.e., Central Plaza and President Automobile go up and down completely randomly.
Pair Corralation between Central Plaza and President Automobile
Assuming the 90 days trading horizon Central Plaza Hotel is expected to generate 1.1 times more return on investment than President Automobile. However, Central Plaza is 1.1 times more volatile than President Automobile Industries. It trades about -0.02 of its potential returns per unit of risk. President Automobile Industries is currently generating about -0.06 per unit of risk. If you would invest 4,754 in Central Plaza Hotel on September 2, 2024 and sell it today you would lose (979.00) from holding Central Plaza Hotel or give up 20.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Central Plaza Hotel vs. President Automobile Industrie
Performance |
| Timeline |
| Central Plaza Hotel |
| President Automobile |
Central Plaza and President Automobile Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Central Plaza and President Automobile
The main advantage of trading using opposite Central Plaza and President Automobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Plaza position performs unexpectedly, President Automobile 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 President Automobile will offset losses from the drop in President Automobile's long position.| Central Plaza vs. Minor International Public | Central Plaza vs. Central Pattana Public | Central Plaza vs. CP ALL Public | Central Plaza vs. Bangkok Dusit Medical |
| President Automobile vs. Phol Dhanya Public | President Automobile vs. PTT Oil and | President Automobile vs. Pico Public | President Automobile vs. Pioneer Motor Public |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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