Correlation Between Lam Soon and Khon Kaen
Can any of the company-specific risk be diversified away by investing in both Lam Soon and Khon Kaen 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 Lam Soon and Khon Kaen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lam Soon Public and Khon Kaen Sugar, you can compare the effects of market volatilities on Lam Soon and Khon Kaen 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 Lam Soon with a short position of Khon Kaen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lam Soon and Khon Kaen.
Diversification Opportunities for Lam Soon and Khon Kaen
Good diversification
The 3 months correlation between Lam and Khon is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Lam Soon Public and Khon Kaen Sugar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Khon Kaen Sugar and Lam Soon 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 Lam Soon Public are associated (or correlated) with Khon Kaen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Khon Kaen Sugar has no effect on the direction of Lam Soon i.e., Lam Soon and Khon Kaen go up and down completely randomly.
Pair Corralation between Lam Soon and Khon Kaen
Assuming the 90 days trading horizon Lam Soon Public is expected to generate 0.74 times more return on investment than Khon Kaen. However, Lam Soon Public is 1.35 times less risky than Khon Kaen. It trades about 0.13 of its potential returns per unit of risk. Khon Kaen Sugar is currently generating about -0.1 per unit of risk. If you would invest 486.00 in Lam Soon Public on August 27, 2024 and sell it today you would earn a total of 14.00 from holding Lam Soon Public or generate 2.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lam Soon Public vs. Khon Kaen Sugar
Performance |
| Timeline |
| Lam Soon Public |
| Khon Kaen Sugar |
Lam Soon and Khon Kaen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lam Soon and Khon Kaen
The main advantage of trading using opposite Lam Soon and Khon Kaen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lam Soon position performs unexpectedly, Khon Kaen 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 Khon Kaen will offset losses from the drop in Khon Kaen's long position.The idea behind Lam Soon Public and Khon Kaen Sugar 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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