Correlation Between Thai President and Thai Group

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

By analyzing existing cross correlation between Thai President Foods and Thai Group Holdings, you can compare the effects of market volatilities on Thai President and Thai Group 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 Thai President with a short position of Thai Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thai President and Thai Group.

Diversification Opportunities for Thai President and Thai Group

0.44

Correlation Coefficient

Thai President  Thai Group

Very weak diversification

The 3 months correlation between Thai and Thai is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Thai President Foods and Thai Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Group Holdings and Thai President 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 Thai President Foods are associated (or correlated) with Thai Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Group Holdings has no effect on the direction of Thai President i.e., Thai President and Thai Group go up and down completely randomly.

Pair Corralation between Thai President and Thai Group

Assuming the 90 days trading horizon Thai President Foods is expected to under-perform the Thai Group. But the stock apears to be less risky and, when comparing its historical volatility, Thai President Foods is 6.3 times less risky than Thai Group. The stock trades about -0.11 of its potential returns per unit of risk. The Thai Group Holdings is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,340  in Thai Group Holdings on September 25, 2024 and sell it today you would lose (40.00) from holding Thai Group Holdings or give up 2.99% of portfolio value over 90 days.

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

Thai President Foods  vs.  Thai Group Holdings

Thai President Foods

Risk-Adjusted Performance

0 of 100

Very Weak

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

Thai Group Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thai Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical indicators, Thai Group 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 Thai President and Thai Group

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

The idea behind Thai President Foods and Thai Group Holdings 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.