Correlation Between Asia Precision and Thai Energy

Can any of the company-specific risk be diversified away by investing in both Asia Precision and Thai 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 Asia Precision and Thai Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Asia Precision Public and Thai Energy Storage, you can compare the effects of market volatilities on Asia Precision and Thai 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 Asia Precision with a short position of Thai Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asia Precision and Thai Energy.

Diversification Opportunities for Asia Precision and Thai Energy

-0.27

Correlation Coefficient

Asia Precision  Thai Energy

Very good diversification

The 3 months correlation between Asia and Thai is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Asia Precision Public and Thai Energy Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Energy Storage and Asia Precision 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 Asia Precision Public are associated (or correlated) with Thai Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Energy Storage has no effect on the direction of Asia Precision i.e., Asia Precision and Thai Energy go up and down completely randomly.

Pair Corralation between Asia Precision and Thai Energy

Assuming the 90 days trading horizon Asia Precision Public is expected to under-perform the Thai Energy. In addition to that, Asia Precision is 9.2 times more volatile than Thai Energy Storage. It trades about -0.02 of its total potential returns per unit of risk. Thai Energy Storage is currently generating about 0.0 per unit of volatility. If you would invest  5,300  in Thai Energy Storage on September 14, 2024 and sell it today you would earn a total of  0.00  from holding Thai Energy Storage or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Asia Precision Public  vs.  Thai Energy Storage

Asia Precision Public

Risk-Adjusted Performance

0 of 100

Very Weak

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

Thai Energy Storage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thai Energy Storage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Thai Energy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Asia Precision and Thai Energy

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

The idea behind Asia Precision Public and Thai Energy Storage 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.