Correlation Between THAI BEVERAGE and Waste Management

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

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

Diversification Opportunities for THAI BEVERAGE and Waste Management

0.27

Correlation Coefficient

THAI BEVERAGE  Waste Management

Modest diversification

The 3 months correlation between THAI and Waste is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding THAI BEVERAGE and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management 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 Waste Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Management has no effect on the direction of THAI BEVERAGE i.e., THAI BEVERAGE and Waste Management go up and down completely randomly.

Pair Corralation between THAI BEVERAGE and Waste Management

Assuming the 90 days trading horizon THAI BEVERAGE is expected to generate 4.34 times more return on investment than Waste Management. However, THAI BEVERAGE is 4.34 times more volatile than Waste Management. It trades about 0.05 of its potential returns per unit of risk. Waste Management is currently generating about 0.07 per unit of risk. If you would invest  15.00  in THAI BEVERAGE on October 26, 2024 and sell it today you would earn a total of  21.00  from holding THAI BEVERAGE or generate 140.0% return on investment over 90 days.

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

THAI BEVERAGE  vs.  Waste Management

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 February 2025.

Waste Management

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Waste Management are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Waste Management 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 Waste Management

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

The idea behind THAI BEVERAGE and Waste Management 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.