Correlation Between Thai Beverage and UNICREDIT SPA

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

Diversification Opportunities for Thai Beverage and UNICREDIT SPA

-0.64

Correlation Coefficient

Thai Beverage  UNICREDIT SPA

Excellent diversification

The 3 months correlation between Thai and UNICREDIT is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Thai Beverage Public and UNICREDIT SPA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNICREDIT SPA ADR 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 UNICREDIT SPA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNICREDIT SPA ADR has no effect on the direction of Thai Beverage i.e., Thai Beverage and UNICREDIT SPA go up and down completely randomly.

Pair Corralation between Thai Beverage and UNICREDIT SPA

Assuming the 90 days horizon Thai Beverage Public is expected to under-perform the UNICREDIT SPA. In addition to that, Thai Beverage is 1.64 times more volatile than UNICREDIT SPA ADR. It trades about -0.01 of its total potential returns per unit of risk. UNICREDIT SPA ADR is currently generating about 0.28 per unit of volatility. If you would invest  1,960  in UNICREDIT SPA ADR on December 29, 2024 and sell it today you would earn a total of  740.00  from holding UNICREDIT SPA ADR or generate 37.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Thai Beverage Public  vs.  UNICREDIT SPA ADR

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.

UNICREDIT SPA ADR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in UNICREDIT SPA ADR are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, UNICREDIT SPA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Thai Beverage and UNICREDIT SPA

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

The idea behind Thai Beverage Public and UNICREDIT SPA ADR 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.