Correlation Between Nova Organic and Thai Coating

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

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

Diversification Opportunities for Nova Organic and Thai Coating

-0.05

Correlation Coefficient

Nova Organic  Thai Coating

Good diversification

The 3 months correlation between Nova and Thai is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Nova Organic PCL and Thai Coating Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Coating Industrial and Nova Organic 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 Nova Organic PCL are associated (or correlated) with Thai Coating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Coating Industrial has no effect on the direction of Nova Organic i.e., Nova Organic and Thai Coating go up and down completely randomly.

Pair Corralation between Nova Organic and Thai Coating

Assuming the 90 days horizon Nova Organic PCL is expected to under-perform the Thai Coating. But the stock apears to be less risky and, when comparing its historical volatility, Nova Organic PCL is 1.35 times less risky than Thai Coating. The stock trades about -0.06 of its potential returns per unit of risk. The Thai Coating Industrial is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,500  in Thai Coating Industrial on September 4, 2024 and sell it today you would earn a total of  250.00  from holding Thai Coating Industrial or generate 10.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Nova Organic PCL  vs.  Thai Coating Industrial

Nova Organic PCL

Risk-Adjusted Performance

0 of 100

Very Weak

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

Thai Coating Industrial

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Thai Coating Industrial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental drivers, Thai Coating sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nova Organic and Thai Coating

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

The idea behind Nova Organic PCL and Thai Coating Industrial 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 CEOs Directory module to screen CEOs from public companies around the world.