Correlation Between THAI BEVERAGE and China Mobile

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

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

Diversification Opportunities for THAI BEVERAGE and China Mobile

-0.08

Correlation Coefficient

THAI BEVERAGE  China Mobile

Good diversification

The 3 months correlation between THAI and China is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding THAI BEVERAGE and China Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Life Insurance 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 China Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Life Insurance has no effect on the direction of THAI BEVERAGE i.e., THAI BEVERAGE and China Mobile go up and down completely randomly.

Pair Corralation between THAI BEVERAGE and China Mobile

Assuming the 90 days trading horizon THAI BEVERAGE is expected to generate 12.92 times less return on investment than China Mobile. But when comparing it to its historical volatility, THAI BEVERAGE is 1.23 times less risky than China Mobile. It trades about 0.01 of its potential returns per unit of risk. China Life Insurance is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  173.00  in China Life Insurance on December 4, 2024 and sell it today you would earn a total of  8.00  from holding China Life Insurance or generate 4.62% 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.  China Life Insurance

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 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.

China Life Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Life Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, China Mobile 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 China Mobile

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

The idea behind THAI BEVERAGE and China Life Insurance 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.