Correlation Between THAI BEVERAGE and NORTHERN OCEAN

Can any of the company-specific risk be diversified away by investing in both THAI BEVERAGE and NORTHERN OCEAN 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 THAI BEVERAGE and NORTHERN OCEAN into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between THAI BEVERAGE and NORTHERN OCEAN LTD, you can compare the effects of market volatilities on THAI BEVERAGE and NORTHERN OCEAN 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 THAI BEVERAGE with a short position of NORTHERN OCEAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of THAI BEVERAGE and NORTHERN OCEAN.

Diversification Opportunities for THAI BEVERAGE and NORTHERN OCEAN

0.6

Correlation Coefficient

THAI BEVERAGE  NORTHERN OCEAN

Poor diversification

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

Pair Corralation between THAI BEVERAGE and NORTHERN OCEAN

Assuming the 90 days trading horizon THAI BEVERAGE is expected to under-perform the NORTHERN OCEAN. But the stock apears to be less risky and, when comparing its historical volatility, THAI BEVERAGE is 1.13 times less risky than NORTHERN OCEAN. The stock trades about -0.05 of its potential returns per unit of risk. The NORTHERN OCEAN LTD is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  60.00  in NORTHERN OCEAN LTD on December 29, 2024 and sell it today you would lose (3.00) from holding NORTHERN OCEAN LTD or give up 5.0% of portfolio value over 90 days.

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

THAI BEVERAGE  vs.  NORTHERN OCEAN LTD

THAI BEVERAGE

Risk-Adjusted Performance

Very Weak

Over the last 90 days THAI BEVERAGE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

NORTHERN OCEAN LTD

Risk-Adjusted Performance

Very Weak

Over the last 90 days NORTHERN OCEAN LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, NORTHERN OCEAN is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with THAI BEVERAGE and NORTHERN OCEAN

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

The idea behind THAI BEVERAGE and NORTHERN OCEAN LTD 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.