Correlation Between Nova Organic and Thai Union

Can any of the company-specific risk be diversified away by investing in both Nova Organic and Thai Union 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 Union 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 Union Group, you can compare the effects of market volatilities on Nova Organic and Thai Union 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 Union. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nova Organic and Thai Union.

Diversification Opportunities for Nova Organic and Thai Union

0.72

Correlation Coefficient

Nova Organic  Thai Union

Poor diversification

The 3 months correlation between Nova and Thai is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Nova Organic PCL and Thai Union Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Union Group 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 Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Union Group has no effect on the direction of Nova Organic i.e., Nova Organic and Thai Union go up and down completely randomly.

Pair Corralation between Nova Organic and Thai Union

Assuming the 90 days horizon Nova Organic PCL is expected to generate 3.85 times more return on investment than Thai Union. However, Nova Organic is 3.85 times more volatile than Thai Union Group. It trades about 0.06 of its potential returns per unit of risk. Thai Union Group is currently generating about -0.19 per unit of risk. If you would invest  104.00  in Nova Organic PCL on September 13, 2024 and sell it today you would earn a total of  4.00  from holding Nova Organic PCL or generate 3.85% return on investment over 90 days.

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

Nova Organic PCL  vs.  Thai Union Group

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 quite persistent fundamental drivers, Nova Organic is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Thai Union Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thai Union Group 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.

Pair Trading with Nova Organic and Thai Union

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

The idea behind Nova Organic PCL and Thai Union Group 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.