Correlation Between Thai Beverage and ARISTOCRAT LEISURE

Can any of the company-specific risk be diversified away by investing in both Thai Beverage and ARISTOCRAT LEISURE 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 ARISTOCRAT LEISURE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Thai Beverage Public and ARISTOCRAT LEISURE, you can compare the effects of market volatilities on Thai Beverage and ARISTOCRAT LEISURE 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 ARISTOCRAT LEISURE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thai Beverage and ARISTOCRAT LEISURE.

Diversification Opportunities for Thai Beverage and ARISTOCRAT LEISURE

-0.43

Correlation Coefficient

Thai Beverage  ARISTOCRAT LEISURE

Very good diversification

The 3 months correlation between Thai and ARISTOCRAT is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Thai Beverage Public and ARISTOCRAT LEISURE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARISTOCRAT LEISURE 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 Public are associated (or correlated) with ARISTOCRAT LEISURE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARISTOCRAT LEISURE has no effect on the direction of Thai Beverage i.e., Thai Beverage and ARISTOCRAT LEISURE go up and down completely randomly.

Pair Corralation between Thai Beverage and ARISTOCRAT LEISURE

Assuming the 90 days horizon Thai Beverage Public is expected to under-perform the ARISTOCRAT LEISURE. In addition to that, Thai Beverage is 2.24 times more volatile than ARISTOCRAT LEISURE. It trades about -0.07 of its total potential returns per unit of risk. ARISTOCRAT LEISURE is currently generating about 0.06 per unit of volatility. If you would invest  4,140  in ARISTOCRAT LEISURE on December 1, 2024 and sell it today you would earn a total of  180.00  from holding ARISTOCRAT LEISURE or generate 4.35% return on investment over 90 days.

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

Thai Beverage Public  vs.  ARISTOCRAT LEISURE

Thai Beverage Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Thai Beverage Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

ARISTOCRAT LEISURE

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ARISTOCRAT LEISURE are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, ARISTOCRAT LEISURE 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 ARISTOCRAT LEISURE

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

The idea behind Thai Beverage Public and ARISTOCRAT LEISURE 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.