Correlation Between Thai Mui and Power Solution

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

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

Diversification Opportunities for Thai Mui and Power Solution

0.9

Correlation Coefficient

Thai Mui  Power Solution

Almost no diversification

The 3 months correlation between Thai and Power is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Thai Mui and Power Solution Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Solution Techn and Thai Mui 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 Mui are associated (or correlated) with Power Solution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Solution Techn has no effect on the direction of Thai Mui i.e., Thai Mui and Power Solution go up and down completely randomly.

Pair Corralation between Thai Mui and Power Solution

Assuming the 90 days trading horizon Thai Mui is expected to generate 0.74 times more return on investment than Power Solution. However, Thai Mui is 1.34 times less risky than Power Solution. It trades about -0.02 of its potential returns per unit of risk. Power Solution Technologies is currently generating about -0.18 per unit of risk. If you would invest  58.00  in Thai Mui on September 3, 2024 and sell it today you would lose (1.00) from holding Thai Mui or give up 1.72% of portfolio value over 90 days.

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

Thai Mui  vs.  Power Solution Technologies

Thai Mui

Risk-Adjusted Performance

9 of 100

OK

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

Power Solution Techn

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Power Solution Technologies are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, Power Solution disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Thai Mui and Power Solution

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

The idea behind Thai Mui and Power Solution Technologies 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.