Correlation Between Big 5 and THAI BEVERAGE

Can any of the company-specific risk be diversified away by investing in both Big 5 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 Big 5 and THAI BEVERAGE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Big 5 Sporting and THAI BEVERAGE, you can compare the effects of market volatilities on Big 5 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 Big 5 with a short position of THAI BEVERAGE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big 5 and THAI BEVERAGE.

Diversification Opportunities for Big 5 and THAI BEVERAGE

0.09

Correlation Coefficient

Big 5  THAI BEVERAGE

Significant diversification

The 3 months correlation between Big and THAI is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Big 5 Sporting and THAI BEVERAGE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THAI BEVERAGE and Big 5 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 Big 5 Sporting 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 Big 5 i.e., Big 5 and THAI BEVERAGE go up and down completely randomly.

Pair Corralation between Big 5 and THAI BEVERAGE

Assuming the 90 days horizon Big 5 is expected to generate 4.78 times less return on investment than THAI BEVERAGE. In addition to that, Big 5 is 1.73 times more volatile than THAI BEVERAGE. It trades about 0.01 of its total potential returns per unit of risk. THAI BEVERAGE is currently generating about 0.08 per unit of volatility. If you would invest  35.00  in THAI BEVERAGE on September 1, 2024 and sell it today you would earn a total of  4.00  from holding THAI BEVERAGE or generate 11.43% return on investment over 90 days.

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

Big 5 Sporting  vs.  THAI BEVERAGE

Big 5 Sporting

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Big 5 Sporting has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Big 5 is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

THAI BEVERAGE

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in THAI BEVERAGE are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, THAI BEVERAGE may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Big 5 and THAI BEVERAGE

The main advantage of trading using opposite Big 5 and THAI BEVERAGE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big 5 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 Big 5 Sporting 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.