Correlation Between Stock Exchange and Thai Solar

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

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

Diversification Opportunities for Stock Exchange and Thai Solar

0.45

Correlation Coefficient

Stock Exchange  Thai Solar

Very weak diversification

The 3 months correlation between Stock and Thai is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Stock Exchange Of and Thai Solar Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Solar Energy and Stock Exchange 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 Stock Exchange Of are associated (or correlated) with Thai Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Solar Energy has no effect on the direction of Stock Exchange i.e., Stock Exchange and Thai Solar go up and down completely randomly.

Pair Corralation between Stock Exchange and Thai Solar

Assuming the 90 days trading horizon Stock Exchange is expected to generate 121.38 times less return on investment than Thai Solar. But when comparing it to its historical volatility, Stock Exchange Of is 118.3 times less risky than Thai Solar. It trades about 0.08 of its potential returns per unit of risk. Thai Solar Energy is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  104.00  in Thai Solar Energy on September 26, 2024 and sell it today you would lose (14.00) from holding Thai Solar Energy or give up 13.46% of portfolio value over 90 days.

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

Stock Exchange Of  vs.  Thai Solar Energy

Pair Trading with Stock Exchange and Thai Solar

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

The idea behind Stock Exchange Of and Thai Solar Energy 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..