Correlation Between NexGen Energy and THAI BEVERAGE

Can any of the company-specific risk be diversified away by investing in both NexGen Energy 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 NexGen Energy and THAI BEVERAGE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NexGen Energy and THAI BEVERAGE, you can compare the effects of market volatilities on NexGen Energy 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 NexGen Energy with a short position of THAI BEVERAGE. Check out your portfolio center. Please also check ongoing floating volatility patterns of NexGen Energy and THAI BEVERAGE.

Diversification Opportunities for NexGen Energy and THAI BEVERAGE

0.42

Correlation Coefficient

NexGen Energy  THAI BEVERAGE

Very weak diversification

The 3 months correlation between NexGen and THAI is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding NexGen Energy and THAI BEVERAGE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THAI BEVERAGE and NexGen Energy 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 NexGen Energy 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 has no effect on the direction of NexGen Energy i.e., NexGen Energy and THAI BEVERAGE go up and down completely randomly.

Pair Corralation between NexGen Energy and THAI BEVERAGE

Assuming the 90 days horizon NexGen Energy is expected to generate 1.72 times less return on investment than THAI BEVERAGE. But when comparing it to its historical volatility, NexGen Energy is 1.36 times less risky than THAI BEVERAGE. It trades about 0.04 of its potential returns per unit of risk. THAI BEVERAGE is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  16.00  in THAI BEVERAGE on October 4, 2024 and sell it today you would earn a total of  21.00  from holding THAI BEVERAGE or generate 131.25% return on investment over 90 days.

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

NexGen Energy  vs.  THAI BEVERAGE

NexGen Energy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NexGen Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, NexGen Energy reported solid returns over the last few months and may actually be approaching a breakup point.

THAI BEVERAGE

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in THAI BEVERAGE are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, THAI BEVERAGE is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with NexGen Energy and THAI BEVERAGE

The main advantage of trading using opposite NexGen Energy and THAI BEVERAGE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NexGen Energy 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 NexGen Energy and THAI BEVERAGE 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.