Correlation Between Royal Orchid and SCB X
Can any of the company-specific risk be diversified away by investing in both Royal Orchid and SCB X 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 SCB X 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 SCB X Public, you can compare the effects of market volatilities on Royal Orchid and SCB X 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 SCB X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Orchid and SCB X.
Diversification Opportunities for Royal Orchid and SCB X
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Royal and SCB is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Royal Orchid Hotel and SCB X Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCB X Public 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 SCB X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCB X Public has no effect on the direction of Royal Orchid i.e., Royal Orchid and SCB X go up and down completely randomly.
Pair Corralation between Royal Orchid and SCB X
Assuming the 90 days trading horizon Royal Orchid Hotel is expected to generate 45.64 times more return on investment than SCB X. However, Royal Orchid is 45.64 times more volatile than SCB X Public. It trades about 0.04 of its potential returns per unit of risk. SCB X Public is currently generating about 0.07 per unit of risk. If you would invest 338.00 in Royal Orchid Hotel on August 24, 2024 and sell it today you would lose (124.00) from holding Royal Orchid Hotel or give up 36.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.75% |
| Values | Daily Returns |
Royal Orchid Hotel vs. SCB X Public
Performance |
| Timeline |
| Royal Orchid Hotel |
| SCB X Public |
Royal Orchid and SCB X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Orchid and SCB X
The main advantage of trading using opposite Royal Orchid and SCB X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Orchid position performs unexpectedly, SCB X 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 SCB X will offset losses from the drop in SCB X's long position.| Royal Orchid vs. OHTL Public | Royal Orchid vs. Laguna Resorts Hotels | Royal Orchid vs. Shangri La Hotel Public | Royal Orchid vs. Ramkhamhaeng Hospital Public |
| SCB X vs. Thai Energy Storage | SCB X vs. Royal Orchid Hotel | SCB X vs. Grand Canal Land | SCB X vs. PRG 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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