Correlation Between THAI BEVERAGE and Heidelberg Materials

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

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

Diversification Opportunities for THAI BEVERAGE and Heidelberg Materials

0.48

Correlation Coefficient

THAI BEVERAGE  Heidelberg Materials

Very weak diversification

The 3 months correlation between THAI and Heidelberg is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding THAI BEVERAGE and Heidelberg Materials AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heidelberg Materials 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 Heidelberg Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heidelberg Materials has no effect on the direction of THAI BEVERAGE i.e., THAI BEVERAGE and Heidelberg Materials go up and down completely randomly.

Pair Corralation between THAI BEVERAGE and Heidelberg Materials

Assuming the 90 days trading horizon THAI BEVERAGE is expected to generate 1.77 times more return on investment than Heidelberg Materials. However, THAI BEVERAGE is 1.77 times more volatile than Heidelberg Materials AG. It trades about 0.07 of its potential returns per unit of risk. Heidelberg Materials AG is currently generating about -0.01 per unit of risk. If you would invest  36.00  in THAI BEVERAGE on September 24, 2024 and sell it today you would earn a total of  1.00  from holding THAI BEVERAGE or generate 2.78% return on investment over 90 days.

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

THAI BEVERAGE  vs.  Heidelberg Materials 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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Heidelberg Materials

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Heidelberg Materials AG are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Heidelberg Materials reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with THAI BEVERAGE and Heidelberg Materials

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

The idea behind THAI BEVERAGE and Heidelberg Materials 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.