Correlation Between Thai Beverage and China Resources

Can any of the company-specific risk be diversified away by investing in both Thai Beverage and China Resources 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 China Resources 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 China Resources Beer, you can compare the effects of market volatilities on Thai Beverage and China Resources 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 China Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thai Beverage and China Resources.

Diversification Opportunities for Thai Beverage and China Resources

-0.45

Correlation Coefficient

Thai Beverage  China Resources

Very good diversification

The 3 months correlation between Thai and China is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Thai Beverage Public and China Resources Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Beer 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 China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Beer has no effect on the direction of Thai Beverage i.e., Thai Beverage and China Resources go up and down completely randomly.

Pair Corralation between Thai Beverage and China Resources

Assuming the 90 days horizon Thai Beverage Public is expected to under-perform the China Resources. In addition to that, Thai Beverage is 1.11 times more volatile than China Resources Beer. It trades about -0.01 of its total potential returns per unit of risk. China Resources Beer is currently generating about 0.05 per unit of volatility. If you would invest  310.00  in China Resources Beer on December 28, 2024 and sell it today you would earn a total of  20.00  from holding China Resources Beer or generate 6.45% 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.  China Resources Beer

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 nearly stable basic indicators, Thai Beverage is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

China Resources Beer

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Resources Beer are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, China Resources may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Thai Beverage and China Resources

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

The idea behind Thai Beverage Public and China Resources Beer 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.