Correlation Between Royal Orchid and Thai Energy
Can any of the company-specific risk be diversified away by investing in both Royal Orchid and Thai Energy 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 Royal Orchid and Thai Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Royal Orchid Hotel and Thai Energy Storage, you can compare the effects of market volatilities on Royal Orchid and Thai Energy 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 Royal Orchid with a short position of Thai Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Orchid and Thai Energy.
Diversification Opportunities for Royal Orchid and Thai Energy
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Royal and Thai is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Royal Orchid Hotel and Thai Energy Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Energy Storage and Royal Orchid 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 Royal Orchid Hotel are associated (or correlated) with Thai Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Energy Storage has no effect on the direction of Royal Orchid i.e., Royal Orchid and Thai Energy go up and down completely randomly.
Pair Corralation between Royal Orchid and Thai Energy
Assuming the 90 days trading horizon Royal Orchid is expected to generate 1.08 times less return on investment than Thai Energy. But when comparing it to its historical volatility, Royal Orchid Hotel is 1.0 times less risky than Thai Energy. It trades about 0.05 of its potential returns per unit of risk. Thai Energy Storage is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 4,850 in Thai Energy Storage on August 28, 2024 and sell it today you would earn a total of 525.00 from holding Thai Energy Storage or generate 10.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.71% |
| Values | Daily Returns |
Royal Orchid Hotel vs. Thai Energy Storage
Performance |
| Timeline |
| Royal Orchid Hotel |
| Thai Energy Storage |
Royal Orchid and Thai Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Orchid and Thai Energy
The main advantage of trading using opposite Royal Orchid and Thai Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Orchid position performs unexpectedly, Thai Energy 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 Energy will offset losses from the drop in Thai Energy's long position.| Royal Orchid vs. Central Retail | Royal Orchid vs. Gulf Energy Development | Royal Orchid vs. BTS Group Holdings | Royal Orchid vs. Bangkok Expressway and |
| Thai Energy vs. AJ Advance Technology | Thai Energy vs. Asia Precision Public | Thai Energy vs. Asia Metal Public | Thai Energy vs. The Erawan Group |
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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