Correlation Between Thai Industrial and Gulf Energy
Can any of the company-specific risk be diversified away by investing in both Thai Industrial and Gulf 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 Thai Industrial and Gulf Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Thai Industrial and Gulf Energy Development, you can compare the effects of market volatilities on Thai Industrial and Gulf 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 Thai Industrial with a short position of Gulf Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thai Industrial and Gulf Energy.
Diversification Opportunities for Thai Industrial and Gulf Energy
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Thai and Gulf is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Thai Industrial and Gulf Energy Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gulf Energy Development and Thai Industrial 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 Thai Industrial are associated (or correlated) with Gulf Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gulf Energy Development has no effect on the direction of Thai Industrial i.e., Thai Industrial and Gulf Energy go up and down completely randomly.
Pair Corralation between Thai Industrial and Gulf Energy
Assuming the 90 days trading horizon Thai Industrial is expected to under-perform the Gulf Energy. But the stock apears to be less risky and, when comparing its historical volatility, Thai Industrial is 1.95 times less risky than Gulf Energy. The stock trades about -0.11 of its potential returns per unit of risk. The Gulf Energy Development is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 5,875 in Gulf Energy Development on October 20, 2024 and sell it today you would earn a total of 75.00 from holding Gulf Energy Development or generate 1.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Thai Industrial vs. Gulf Energy Development
Performance |
| Timeline |
| Thai Industrial |
| Gulf Energy Development |
Thai Industrial and Gulf Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Thai Industrial and Gulf Energy
The main advantage of trading using opposite Thai Industrial and Gulf Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thai Industrial position performs unexpectedly, Gulf 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 Gulf Energy will offset losses from the drop in Gulf Energy's long position.The idea behind Thai Industrial and Gulf Energy Development 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.| Gulf Energy vs. Energy Absolute Public | Gulf Energy vs. BGrimm Power Public | Gulf Energy vs. Global Power Synergy | Gulf Energy vs. CP ALL 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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