Correlation Between THAI BEVERAGE and AIR PRODCHEMICALS

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

By analyzing existing cross correlation between THAI BEVERAGE and AIR PRODCHEMICALS, you can compare the effects of market volatilities on THAI BEVERAGE and AIR PRODCHEMICALS 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 AIR PRODCHEMICALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of THAI BEVERAGE and AIR PRODCHEMICALS.

Diversification Opportunities for THAI BEVERAGE and AIR PRODCHEMICALS

0.28

Correlation Coefficient

THAI BEVERAGE  AIR PRODCHEMICALS

Modest diversification

The 3 months correlation between THAI and AIR is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding THAI BEVERAGE and AIR PRODCHEMICALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIR PRODCHEMICALS 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 AIR PRODCHEMICALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIR PRODCHEMICALS has no effect on the direction of THAI BEVERAGE i.e., THAI BEVERAGE and AIR PRODCHEMICALS go up and down completely randomly.

Pair Corralation between THAI BEVERAGE and AIR PRODCHEMICALS

Assuming the 90 days trading horizon THAI BEVERAGE is expected to generate 2.08 times more return on investment than AIR PRODCHEMICALS. However, THAI BEVERAGE is 2.08 times more volatile than AIR PRODCHEMICALS. It trades about -0.19 of its potential returns per unit of risk. AIR PRODCHEMICALS is currently generating about -0.59 per unit of risk. If you would invest  39.00  in THAI BEVERAGE on October 12, 2024 and sell it today you would lose (2.00) from holding THAI BEVERAGE or give up 5.13% of portfolio value over 90 days.

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

THAI BEVERAGE  vs.  AIR PRODCHEMICALS

THAI BEVERAGE

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days THAI BEVERAGE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, THAI BEVERAGE is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

AIR PRODCHEMICALS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AIR PRODCHEMICALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AIR PRODCHEMICALS is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with THAI BEVERAGE and AIR PRODCHEMICALS

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

The idea behind THAI BEVERAGE and AIR PRODCHEMICALS 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.