Correlation Between Vita Coco and Thai Beverage

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

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

Diversification Opportunities for Vita Coco and Thai Beverage

-0.06

Correlation Coefficient

Vita Coco  Thai Beverage

Good diversification

The 3 months correlation between Vita and Thai is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Vita Coco and Thai Beverage PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Beverage PCL and Vita Coco 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 Vita Coco 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 PCL has no effect on the direction of Vita Coco i.e., Vita Coco and Thai Beverage go up and down completely randomly.

Pair Corralation between Vita Coco and Thai Beverage

Given the investment horizon of 90 days Vita Coco is expected to under-perform the Thai Beverage. In addition to that, Vita Coco is 5.68 times more volatile than Thai Beverage PCL. It trades about -0.06 of its total potential returns per unit of risk. Thai Beverage PCL is currently generating about 0.13 per unit of volatility. If you would invest  3,231  in Thai Beverage PCL on December 27, 2024 and sell it today you would earn a total of  136.00  from holding Thai Beverage PCL or generate 4.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Vita Coco  vs.  Thai Beverage PCL

Vita Coco

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vita Coco has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Thai Beverage PCL

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Thai Beverage PCL are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Thai Beverage is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vita Coco and Thai Beverage

The main advantage of trading using opposite Vita Coco and Thai Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vita Coco 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 Vita Coco and Thai Beverage PCL 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.