Correlation Between Thai Reinsurance and Thai Group

Can any of the company-specific risk be diversified away by investing in both Thai Reinsurance 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 Reinsurance 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 Reinsurance Public and Thai Group Holdings, you can compare the effects of market volatilities on Thai Reinsurance 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 Reinsurance with a short position of Thai Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thai Reinsurance and Thai Group.

Diversification Opportunities for Thai Reinsurance and Thai Group

0.81

Correlation Coefficient

Thai Reinsurance  Thai Group

Very poor diversification

The 3 months correlation between Thai and Thai is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Thai Reinsurance Public 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 Reinsurance 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 Reinsurance Public 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 Reinsurance i.e., Thai Reinsurance and Thai Group go up and down completely randomly.

Pair Corralation between Thai Reinsurance and Thai Group

Assuming the 90 days trading horizon Thai Reinsurance Public is expected to under-perform the Thai Group. But the stock apears to be less risky and, when comparing its historical volatility, Thai Reinsurance Public is 1.48 times less risky than Thai Group. The stock trades about -0.12 of its potential returns per unit of risk. The Thai Group Holdings is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,210  in Thai Group Holdings on September 25, 2024 and sell it today you would earn a total of  90.00  from holding Thai Group Holdings or generate 7.44% return on investment over 90 days.

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

Thai Reinsurance Public  vs.  Thai Group Holdings

Thai Reinsurance Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thai Reinsurance Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional 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 Reinsurance and Thai Group

The main advantage of trading using opposite Thai Reinsurance and Thai Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thai Reinsurance 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 Reinsurance Public 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.

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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.