Correlation Between MidCap Financial and Thai Beverage

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

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

Diversification Opportunities for MidCap Financial and Thai Beverage

0.02

Correlation Coefficient

MidCap Financial  Thai Beverage

Significant diversification

The 3 months correlation between MidCap and Thai is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding MidCap Financial Investment and Thai Beverage Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Beverage Public and MidCap Financial 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 MidCap Financial Investment are associated (or correlated) with Thai Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Beverage Public has no effect on the direction of MidCap Financial i.e., MidCap Financial and Thai Beverage go up and down completely randomly.

Pair Corralation between MidCap Financial and Thai Beverage

Assuming the 90 days trading horizon MidCap Financial Investment is expected to under-perform the Thai Beverage. But the stock apears to be less risky and, when comparing its historical volatility, MidCap Financial Investment is 2.54 times less risky than Thai Beverage. The stock trades about -0.08 of its potential returns per unit of risk. The Thai Beverage Public is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  37.00  in Thai Beverage Public on December 21, 2024 and sell it today you would lose (2.00) from holding Thai Beverage Public or give up 5.41% of portfolio value over 90 days.

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

MidCap Financial Investment  vs.  Thai Beverage Public

MidCap Financial Inv

Risk-Adjusted Performance

Very Weak

Over the last 90 days MidCap Financial Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, MidCap Financial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Thai Beverage Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Thai Beverage Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Thai Beverage is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with MidCap Financial and Thai Beverage

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

The idea behind MidCap Financial Investment and Thai Beverage 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..