Correlation Between Lam Soon and SiS Distribution
Can any of the company-specific risk be diversified away by investing in both Lam Soon and SiS Distribution 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 SiS Distribution 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 SiS Distribution Public, you can compare the effects of market volatilities on Lam Soon and SiS Distribution 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 SiS Distribution. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lam Soon and SiS Distribution.
Diversification Opportunities for Lam Soon and SiS Distribution
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Lam and SiS is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Lam Soon Public and SiS Distribution Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SiS Distribution Public 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 SiS Distribution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SiS Distribution Public has no effect on the direction of Lam Soon i.e., Lam Soon and SiS Distribution go up and down completely randomly.
Pair Corralation between Lam Soon and SiS Distribution
Assuming the 90 days trading horizon Lam Soon is expected to generate 1.01 times less return on investment than SiS Distribution. But when comparing it to its historical volatility, Lam Soon Public is 1.0 times less risky than SiS Distribution. It trades about 0.11 of its potential returns per unit of risk. SiS Distribution Public is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,650 in SiS Distribution Public on August 29, 2024 and sell it today you would earn a total of 300.00 from holding SiS Distribution Public or generate 11.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lam Soon Public vs. SiS Distribution Public
Performance |
| Timeline |
| Lam Soon Public |
| SiS Distribution Public |
Lam Soon and SiS Distribution Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lam Soon and SiS Distribution
The main advantage of trading using opposite Lam Soon and SiS Distribution positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lam Soon position performs unexpectedly, SiS Distribution 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 SiS Distribution will offset losses from the drop in SiS Distribution's long position.The idea behind Lam Soon Public and SiS Distribution 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.| SiS Distribution vs. AP Public | SiS Distribution vs. Jasmine International Public | SiS Distribution vs. Asia Plus Group | SiS Distribution vs. Bangkok Aviation Fuel |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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