Correlation Between General Engineering and Samchai Steel

Can any of the company-specific risk be diversified away by investing in both General Engineering and Samchai Steel 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 General Engineering and Samchai Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between General Engineering Public and Samchai Steel Industries, you can compare the effects of market volatilities on General Engineering and Samchai Steel 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 General Engineering with a short position of Samchai Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of General Engineering and Samchai Steel.

Diversification Opportunities for General Engineering and Samchai Steel

-0.51

Correlation Coefficient

General Engineering  Samchai Steel

Excellent diversification

The 3 months correlation between General and Samchai is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding General Engineering Public and Samchai Steel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samchai Steel Industries and General Engineering 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 General Engineering Public are associated (or correlated) with Samchai Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samchai Steel Industries has no effect on the direction of General Engineering i.e., General Engineering and Samchai Steel go up and down completely randomly.

Pair Corralation between General Engineering and Samchai Steel

Assuming the 90 days trading horizon General Engineering Public is expected to under-perform the Samchai Steel. But the stock apears to be less risky and, when comparing its historical volatility, General Engineering Public is 2.39 times less risky than Samchai Steel. The stock trades about -0.1 of its potential returns per unit of risk. The Samchai Steel Industries is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  13.00  in Samchai Steel Industries on September 24, 2024 and sell it today you would earn a total of  13.00  from holding Samchai Steel Industries or generate 100.0% return on investment over 90 days.

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

General Engineering Public  vs.  Samchai Steel Industries

General Engineering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days General Engineering Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Samchai Steel Industries

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Samchai Steel Industries are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting primary indicators, Samchai Steel disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with General Engineering and Samchai Steel

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

The idea behind General Engineering Public and Samchai Steel Industries 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..