Correlation Between Siam Cement and MFC Industrial

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

By analyzing existing cross correlation between The Siam Cement and MFC Industrial Real, you can compare the effects of market volatilities on Siam Cement and MFC Industrial 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 Cement with a short position of MFC Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Siam Cement and MFC Industrial.

Diversification Opportunities for Siam Cement and MFC Industrial

0.64

Correlation Coefficient

Siam Cement  MFC Industrial

Poor diversification

The 3 months correlation between Siam and MFC is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding The Siam Cement and MFC Industrial Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFC Industrial Real and Siam Cement 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 The Siam Cement are associated (or correlated) with MFC Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFC Industrial Real has no effect on the direction of Siam Cement i.e., Siam Cement and MFC Industrial go up and down completely randomly.

Pair Corralation between Siam Cement and MFC Industrial

Assuming the 90 days trading horizon The Siam Cement is expected to generate 0.14 times more return on investment than MFC Industrial. However, The Siam Cement is 6.94 times less risky than MFC Industrial. It trades about -0.06 of its potential returns per unit of risk. MFC Industrial Real is currently generating about -0.28 per unit of risk. If you would invest  25,050  in The Siam Cement on February 3, 2024 and sell it today you would lose (350.00) from holding The Siam Cement or give up 1.4% of portfolio value over 90 days.

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

The Siam Cement  vs.  MFC Industrial Real

Siam Cement

Risk-Adjusted Performance

0 of 100

Very Weak

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

MFC Industrial Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MFC Industrial Real 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 basic indicators remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Siam Cement and MFC Industrial

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

The idea behind The Siam Cement and MFC Industrial Real 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.