Correlation Between Thai Beverage and SMA Solar

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

Diversification Opportunities for Thai Beverage and SMA Solar

-0.47

Correlation Coefficient

Thai Beverage  SMA Solar

Very good diversification

The 3 months correlation between Thai and SMA is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Thai Beverage Public and SMA Solar Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMA Solar Technology 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 SMA Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMA Solar Technology has no effect on the direction of Thai Beverage i.e., Thai Beverage and SMA Solar go up and down completely randomly.

Pair Corralation between Thai Beverage and SMA Solar

Assuming the 90 days horizon Thai Beverage Public is expected to under-perform the SMA Solar. But the stock apears to be less risky and, when comparing its historical volatility, Thai Beverage Public is 1.91 times less risky than SMA Solar. The stock trades about -0.03 of its potential returns per unit of risk. The SMA Solar Technology is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,419  in SMA Solar Technology on December 27, 2024 and sell it today you would earn a total of  709.00  from holding SMA Solar Technology or generate 49.96% 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.  SMA Solar Technology

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.

SMA Solar Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SMA Solar Technology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, SMA Solar reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Thai Beverage and SMA Solar

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

The idea behind Thai Beverage Public and SMA Solar Technology 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.