Correlation Between Applied DB and Siam Commercial

Can any of the company-specific risk be diversified away by investing in both Applied DB and Siam Commercial 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 Applied DB and Siam Commercial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Applied DB Public and The Siam Commercial, you can compare the effects of market volatilities on Applied DB and Siam Commercial 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 Applied DB with a short position of Siam Commercial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied DB and Siam Commercial.

Diversification Opportunities for Applied DB and Siam Commercial

-0.18

Correlation Coefficient

Applied DB  Siam Commercial

Good diversification

The 3 months correlation between Applied and Siam is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Applied DB Public and The Siam Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siam Commercial and Applied DB 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 Applied DB Public are associated (or correlated) with Siam Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siam Commercial has no effect on the direction of Applied DB i.e., Applied DB and Siam Commercial go up and down completely randomly.

Pair Corralation between Applied DB and Siam Commercial

Assuming the 90 days trading horizon Applied DB is expected to generate 2.05 times less return on investment than Siam Commercial. But when comparing it to its historical volatility, Applied DB Public is 1.41 times less risky than Siam Commercial. It trades about 0.04 of its potential returns per unit of risk. The Siam Commercial is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  11,076  in The Siam Commercial on September 28, 2024 and sell it today you would earn a total of  624.00  from holding The Siam Commercial or generate 5.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Applied DB Public  vs.  The Siam Commercial

Applied DB Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Applied DB Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, Applied DB is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Siam Commercial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Siam Commercial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Siam Commercial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Applied DB and Siam Commercial

The main advantage of trading using opposite Applied DB and Siam Commercial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied DB position performs unexpectedly, Siam Commercial 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 Siam Commercial will offset losses from the drop in Siam Commercial's long position.

The idea behind Applied DB Public and The Siam Commercial 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.