Correlation Between Hwa Fong and Thai Metal
Can any of the company-specific risk be diversified away by investing in both Hwa Fong and Thai Metal 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 Hwa Fong and Thai Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hwa Fong Rubber and Thai Metal Drum, you can compare the effects of market volatilities on Hwa Fong and Thai Metal 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 Hwa Fong with a short position of Thai Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hwa Fong and Thai Metal.
Diversification Opportunities for Hwa Fong and Thai Metal
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hwa and Thai is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Hwa Fong Rubber and Thai Metal Drum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Metal Drum and Hwa Fong 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 Hwa Fong Rubber are associated (or correlated) with Thai Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Metal Drum has no effect on the direction of Hwa Fong i.e., Hwa Fong and Thai Metal go up and down completely randomly.
Pair Corralation between Hwa Fong and Thai Metal
Assuming the 90 days trading horizon Hwa Fong Rubber is expected to under-perform the Thai Metal. In addition to that, Hwa Fong is 1.27 times more volatile than Thai Metal Drum. It trades about -0.26 of its total potential returns per unit of risk. Thai Metal Drum is currently generating about 0.08 per unit of volatility. If you would invest 2,420 in Thai Metal Drum on September 1, 2024 and sell it today you would earn a total of 40.00 from holding Thai Metal Drum or generate 1.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hwa Fong Rubber vs. Thai Metal Drum
Performance |
| Timeline |
| Hwa Fong Rubber |
| Thai Metal Drum |
Hwa Fong and Thai Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hwa Fong and Thai Metal
The main advantage of trading using opposite Hwa Fong and Thai Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hwa Fong position performs unexpectedly, Thai Metal 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 Thai Metal will offset losses from the drop in Thai Metal's long position.| Hwa Fong vs. TRC Construction Public | Hwa Fong vs. Bangkok Expressway and | Hwa Fong vs. Lohakit Metal Public | Hwa Fong vs. Gunkul Engineering Public |
| Thai Metal vs. Thantawan Industry Public | Thai Metal vs. Thitikorn Public | Thai Metal vs. Siam Steel Service | Thai Metal vs. Thai Vegetable Oil |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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