Correlation Between Royal Orchid and Siamese Asset

Can any of the company-specific risk be diversified away by investing in both Royal Orchid and Siamese Asset 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 Royal Orchid and Siamese Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Royal Orchid Hotel and Siamese Asset Public, you can compare the effects of market volatilities on Royal Orchid and Siamese Asset 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 Royal Orchid with a short position of Siamese Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Orchid and Siamese Asset.

Diversification Opportunities for Royal Orchid and Siamese Asset

0.59

Correlation Coefficient

Royal Orchid  Siamese Asset

Very weak diversification

The 3 months correlation between Royal and Siamese is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Royal Orchid Hotel and Siamese Asset Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siamese Asset Public and Royal Orchid 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 Royal Orchid Hotel are associated (or correlated) with Siamese Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siamese Asset Public has no effect on the direction of Royal Orchid i.e., Royal Orchid and Siamese Asset go up and down completely randomly.

Pair Corralation between Royal Orchid and Siamese Asset

Assuming the 90 days trading horizon Royal Orchid is expected to generate 1.48 times less return on investment than Siamese Asset. In addition to that, Royal Orchid is 3.52 times more volatile than Siamese Asset Public. It trades about 0.02 of its total potential returns per unit of risk. Siamese Asset Public is currently generating about 0.08 per unit of volatility. If you would invest  740.00  in Siamese Asset Public on September 23, 2024 and sell it today you would earn a total of  10.00  from holding Siamese Asset Public or generate 1.35% return on investment over 90 days.

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

Royal Orchid Hotel  vs.  Siamese Asset Public

Royal Orchid Hotel

Risk-Adjusted Performance

0 of 100

Very Weak

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

Siamese Asset Public

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Royal Orchid and Siamese Asset

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

The idea behind Royal Orchid Hotel and Siamese Asset Public 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.