Correlation Between THAI BEVERAGE and ORMAT TECHNOLOGIES

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

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

Diversification Opportunities for THAI BEVERAGE and ORMAT TECHNOLOGIES

0.33

Correlation Coefficient

THAI BEVERAGE  ORMAT TECHNOLOGIES

Weak diversification

The 3 months correlation between THAI and ORMAT is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding THAI BEVERAGE and ORMAT TECHNOLOGIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ORMAT TECHNOLOGIES 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 ORMAT TECHNOLOGIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ORMAT TECHNOLOGIES has no effect on the direction of THAI BEVERAGE i.e., THAI BEVERAGE and ORMAT TECHNOLOGIES go up and down completely randomly.

Pair Corralation between THAI BEVERAGE and ORMAT TECHNOLOGIES

Assuming the 90 days trading horizon THAI BEVERAGE is expected to under-perform the ORMAT TECHNOLOGIES. In addition to that, THAI BEVERAGE is 1.23 times more volatile than ORMAT TECHNOLOGIES. It trades about -0.03 of its total potential returns per unit of risk. ORMAT TECHNOLOGIES is currently generating about 0.02 per unit of volatility. If you would invest  6,513  in ORMAT TECHNOLOGIES on December 21, 2024 and sell it today you would earn a total of  107.00  from holding ORMAT TECHNOLOGIES or generate 1.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

THAI BEVERAGE  vs.  ORMAT TECHNOLOGIES

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.

ORMAT TECHNOLOGIES

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ORMAT TECHNOLOGIES are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, ORMAT TECHNOLOGIES is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with THAI BEVERAGE and ORMAT TECHNOLOGIES

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

The idea behind THAI BEVERAGE and ORMAT TECHNOLOGIES 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.