Correlation Between Thai Rung and Next Capital

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

By analyzing existing cross correlation between Thai Rung Union and Next Capital Public, you can compare the effects of market volatilities on Thai Rung and Next Capital 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 Rung with a short position of Next Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thai Rung and Next Capital.

Diversification Opportunities for Thai Rung and Next Capital

-0.55

Correlation Coefficient

Thai Rung  Next Capital

Excellent diversification

The 3 months correlation between Thai and Next is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Thai Rung Union and Next Capital Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Next Capital Public and Thai Rung 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 Rung Union are associated (or correlated) with Next Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Next Capital Public has no effect on the direction of Thai Rung i.e., Thai Rung and Next Capital go up and down completely randomly.

Pair Corralation between Thai Rung and Next Capital

Assuming the 90 days trading horizon Thai Rung Union is expected to generate 0.24 times more return on investment than Next Capital. However, Thai Rung Union is 4.11 times less risky than Next Capital. It trades about 0.18 of its potential returns per unit of risk. Next Capital Public is currently generating about -0.12 per unit of risk. If you would invest  312.00  in Thai Rung Union on September 27, 2024 and sell it today you would earn a total of  30.00  from holding Thai Rung Union or generate 9.62% return on investment over 90 days.

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

Thai Rung Union  vs.  Next Capital Public

Thai Rung Union

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Thai Rung Union are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Thai Rung may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Next Capital Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Next Capital Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting 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.

Pair Trading with Thai Rung and Next Capital

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

The idea behind Thai Rung Union and Next Capital Public 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.