Correlation Between Italian Thai and BEC World

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

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

Diversification Opportunities for Italian Thai and BEC World

0.91

Correlation Coefficient

Italian Thai  BEC World

Almost no diversification

The 3 months correlation between Italian and BEC is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Italian Thai Development Publi and BEC World Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BEC World Public and Italian Thai 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 Italian Thai Development Public are associated (or correlated) with BEC World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BEC World Public has no effect on the direction of Italian Thai i.e., Italian Thai and BEC World go up and down completely randomly.

Pair Corralation between Italian Thai and BEC World

Assuming the 90 days trading horizon Italian Thai is expected to generate 1.0 times less return on investment than BEC World. In addition to that, Italian Thai is 1.0 times more volatile than BEC World Public. It trades about 0.05 of its total potential returns per unit of risk. BEC World Public is currently generating about 0.05 per unit of volatility. If you would invest  503.00  in BEC World Public on October 5, 2024 and sell it today you would lose (115.00) from holding BEC World Public or give up 22.86% of portfolio value over 90 days.

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

Italian Thai Development Publi  vs.  BEC World Public

Italian Thai Develop

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Italian Thai Development Public 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 fundamental indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

BEC World Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BEC World Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Italian Thai and BEC World

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

The idea behind Italian Thai Development Public and BEC World 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.