Correlation Between Business Online and Thai Rubber

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Can any of the company-specific risk be diversified away by investing in both Business Online and Thai Rubber 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 Business Online and Thai Rubber into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Business Online PCL and Thai Rubber Latex, you can compare the effects of market volatilities on Business Online and Thai Rubber 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 Business Online with a short position of Thai Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of Business Online and Thai Rubber.

Diversification Opportunities for Business Online and Thai Rubber

0.6
  Correlation Coefficient

Poor diversification

The 3 months correlation between Business and Thai is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Business Online PCL and Thai Rubber Latex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Rubber Latex and Business Online 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 Business Online PCL are associated (or correlated) with Thai Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Rubber Latex has no effect on the direction of Business Online i.e., Business Online and Thai Rubber go up and down completely randomly.

Pair Corralation between Business Online and Thai Rubber

Assuming the 90 days trading horizon Business Online PCL is expected to under-perform the Thai Rubber. In addition to that, Business Online is 1.68 times more volatile than Thai Rubber Latex. It trades about -0.1 of its total potential returns per unit of risk. Thai Rubber Latex is currently generating about 0.27 per unit of volatility. If you would invest  97.00  in Thai Rubber Latex on September 13, 2024 and sell it today you would earn a total of  9.00  from holding Thai Rubber Latex or generate 9.28% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Business Online PCL  vs.  Thai Rubber Latex

 Performance 
       Timeline  
Business Online PCL 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Business Online PCL 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 essential indicators 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.
Thai Rubber Latex 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Thai Rubber Latex has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Business Online and Thai Rubber Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Business Online and Thai Rubber

The main advantage of trading using opposite Business Online and Thai Rubber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Business Online position performs unexpectedly, Thai Rubber 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 Rubber will offset losses from the drop in Thai Rubber's long position.
The idea behind Business Online PCL and Thai Rubber Latex 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.
Check out your portfolio center.
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..

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