Correlation Between Siam Steel and Thai Metal

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

By analyzing existing cross correlation between Siam Steel Service and Thai Metal Drum, you can compare the effects of market volatilities on Siam Steel and Thai Metal 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 Siam Steel with a short position of Thai Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Siam Steel and Thai Metal.

Diversification Opportunities for Siam Steel and Thai Metal

-0.04

Correlation Coefficient

Siam Steel  Thai Metal

Good diversification

The 3 months correlation between Siam and Thai is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Siam Steel Service and Thai Metal Drum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Metal Drum and Siam Steel 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 Siam Steel Service are associated (or correlated) with Thai Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Metal Drum has no effect on the direction of Siam Steel i.e., Siam Steel and Thai Metal go up and down completely randomly.

Pair Corralation between Siam Steel and Thai Metal

Assuming the 90 days trading horizon Siam Steel Service is expected to generate 1.77 times more return on investment than Thai Metal. However, Siam Steel is 1.77 times more volatile than Thai Metal Drum. It trades about 0.07 of its potential returns per unit of risk. Thai Metal Drum is currently generating about 0.0 per unit of risk. If you would invest  214.00  in Siam Steel Service on September 15, 2024 and sell it today you would earn a total of  4.00  from holding Siam Steel Service or generate 1.87% return on investment over 90 days.

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

Siam Steel Service  vs.  Thai Metal Drum

Siam Steel Service

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Siam Steel Service has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Thai Metal Drum

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Thai Metal Drum are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, Thai Metal disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Siam Steel and Thai Metal

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

The idea behind Siam Steel Service and Thai Metal Drum 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.