Correlation Between THAI BEVERAGE and Deckers Outdoor

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

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

Diversification Opportunities for THAI BEVERAGE and Deckers Outdoor

0.69

Correlation Coefficient

THAI BEVERAGE  Deckers Outdoor

Poor diversification

The 3 months correlation between THAI and Deckers is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding THAI BEVERAGE and Deckers Outdoor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deckers Outdoor 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 Deckers Outdoor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deckers Outdoor has no effect on the direction of THAI BEVERAGE i.e., THAI BEVERAGE and Deckers Outdoor go up and down completely randomly.

Pair Corralation between THAI BEVERAGE and Deckers Outdoor

Assuming the 90 days trading horizon THAI BEVERAGE is expected to generate 1.93 times more return on investment than Deckers Outdoor. However, THAI BEVERAGE is 1.93 times more volatile than Deckers Outdoor. It trades about 0.06 of its potential returns per unit of risk. Deckers Outdoor is currently generating about 0.1 per unit of risk. If you would invest  15.00  in THAI BEVERAGE on September 18, 2024 and sell it today you would earn a total of  23.00  from holding THAI BEVERAGE or generate 153.33% return on investment over 90 days.

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

THAI BEVERAGE  vs.  Deckers Outdoor

THAI BEVERAGE

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in THAI BEVERAGE are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, THAI BEVERAGE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Deckers Outdoor

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Deckers Outdoor are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Deckers Outdoor reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with THAI BEVERAGE and Deckers Outdoor

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

The idea behind THAI BEVERAGE and Deckers Outdoor 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.