Correlation Between Thai Metal and Thai Vegetable
Can any of the company-specific risk be diversified away by investing in both Thai Metal and Thai Vegetable 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 Metal and Thai Vegetable into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Thai Metal Drum and Thai Vegetable Oil, you can compare the effects of market volatilities on Thai Metal and Thai Vegetable 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 Metal with a short position of Thai Vegetable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thai Metal and Thai Vegetable.
Diversification Opportunities for Thai Metal and Thai Vegetable
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Thai and Thai is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Thai Metal Drum and Thai Vegetable Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Vegetable Oil and Thai Metal 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 Metal Drum are associated (or correlated) with Thai Vegetable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Vegetable Oil has no effect on the direction of Thai Metal i.e., Thai Metal and Thai Vegetable go up and down completely randomly.
Pair Corralation between Thai Metal and Thai Vegetable
Assuming the 90 days trading horizon Thai Metal Drum is expected to generate 91.34 times more return on investment than Thai Vegetable. However, Thai Metal is 91.34 times more volatile than Thai Vegetable Oil. It trades about 0.11 of its potential returns per unit of risk. Thai Vegetable Oil is currently generating about 0.03 per unit of risk. If you would invest 2,440 in Thai Metal Drum on September 1, 2024 and sell it today you would earn a total of 20.00 from holding Thai Metal Drum or generate 0.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Thai Metal Drum vs. Thai Vegetable Oil
Performance |
| Timeline |
| Thai Metal Drum |
| Thai Vegetable Oil |
Thai Metal and Thai Vegetable Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Thai Metal and Thai Vegetable
The main advantage of trading using opposite Thai Metal and Thai Vegetable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thai Metal position performs unexpectedly, Thai Vegetable 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 Vegetable will offset losses from the drop in Thai Vegetable's long position.| Thai Metal vs. Thantawan Industry Public | Thai Metal vs. Thitikorn Public | Thai Metal vs. Siam Steel Service | Thai Metal vs. Thai Vegetable Oil |
| Thai Vegetable vs. Charoen Pokphand Foods | Thai Vegetable vs. Thai Union Group | Thai Vegetable vs. TISCO Financial Group | Thai Vegetable vs. Thanachart Capital 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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