Correlation Between Siam Cement and Bangkok Expressway
Can any of the company-specific risk be diversified away by investing in both Siam Cement and Bangkok Expressway 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 Siam Cement and Bangkok Expressway into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Siam Cement and Bangkok Expressway and, you can compare the effects of market volatilities on Siam Cement and Bangkok Expressway 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 Siam Cement with a short position of Bangkok Expressway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Siam Cement and Bangkok Expressway.
Diversification Opportunities for Siam Cement and Bangkok Expressway
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Siam and Bangkok is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding The Siam Cement and Bangkok Expressway and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bangkok Expressway and and Siam Cement 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 The Siam Cement are associated (or correlated) with Bangkok Expressway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bangkok Expressway and has no effect on the direction of Siam Cement i.e., Siam Cement and Bangkok Expressway go up and down completely randomly.
Pair Corralation between Siam Cement and Bangkok Expressway
Assuming the 90 days trading horizon The Siam Cement is expected to under-perform the Bangkok Expressway. But the stock apears to be less risky and, when comparing its historical volatility, The Siam Cement is 1.4 times less risky than Bangkok Expressway. The stock trades about -0.24 of its potential returns per unit of risk. The Bangkok Expressway and is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest 680.00 in Bangkok Expressway and on November 27, 2024 and sell it today you would lose (30.00) from holding Bangkok Expressway and or give up 4.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Siam Cement vs. Bangkok Expressway and
Performance |
| Timeline |
| Siam Cement |
| Bangkok Expressway and |
Siam Cement and Bangkok Expressway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Siam Cement and Bangkok Expressway
The main advantage of trading using opposite Siam Cement and Bangkok Expressway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Siam Cement position performs unexpectedly, Bangkok Expressway 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 Bangkok Expressway will offset losses from the drop in Bangkok Expressway's long position.The idea behind The Siam Cement and Bangkok Expressway and 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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