Correlation Between THAI BEVERAGE and Metro AG

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

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

Diversification Opportunities for THAI BEVERAGE and Metro AG

-0.06

Correlation Coefficient

THAI BEVERAGE  Metro AG

Good diversification

The 3 months correlation between THAI and Metro is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding THAI BEVERAGE and Metro AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro AG 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 Metro AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro AG has no effect on the direction of THAI BEVERAGE i.e., THAI BEVERAGE and Metro AG go up and down completely randomly.

Pair Corralation between THAI BEVERAGE and Metro AG

Assuming the 90 days trading horizon THAI BEVERAGE is expected to generate 1.62 times more return on investment than Metro AG. However, THAI BEVERAGE is 1.62 times more volatile than Metro AG. It trades about 0.05 of its potential returns per unit of risk. Metro AG is currently generating about -0.01 per unit of risk. If you would invest  16.00  in THAI BEVERAGE on October 4, 2024 and sell it today you would earn a total of  21.00  from holding THAI BEVERAGE or generate 131.25% return on investment over 90 days.

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

THAI BEVERAGE  vs.  Metro AG

THAI BEVERAGE

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in THAI BEVERAGE are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, THAI BEVERAGE is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Metro AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metro AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, Metro AG is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with THAI BEVERAGE and Metro AG

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

The idea behind THAI BEVERAGE and Metro AG 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.