Correlation Between Tri Pointe and THAI BEVERAGE

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

By analyzing existing cross correlation between Tri Pointe Homes and THAI BEVERAGE, you can compare the effects of market volatilities on Tri Pointe and THAI BEVERAGE 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 Tri Pointe with a short position of THAI BEVERAGE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tri Pointe and THAI BEVERAGE.

Diversification Opportunities for Tri Pointe and THAI BEVERAGE

0.65

Correlation Coefficient

Tri Pointe  THAI BEVERAGE

Poor diversification

The 3 months correlation between Tri and THAI is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Tri Pointe Homes and THAI BEVERAGE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THAI BEVERAGE and Tri Pointe 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 Tri Pointe Homes are associated (or correlated) with THAI BEVERAGE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of THAI BEVERAGE has no effect on the direction of Tri Pointe i.e., Tri Pointe and THAI BEVERAGE go up and down completely randomly.

Pair Corralation between Tri Pointe and THAI BEVERAGE

Assuming the 90 days horizon Tri Pointe Homes is expected to under-perform the THAI BEVERAGE. In addition to that, Tri Pointe is 1.15 times more volatile than THAI BEVERAGE. It trades about -0.1 of its total potential returns per unit of risk. THAI BEVERAGE is currently generating about -0.03 per unit of volatility. If you would invest  37.00  in THAI BEVERAGE on December 27, 2024 and sell it today you would lose (2.00) from holding THAI BEVERAGE or give up 5.41% of portfolio value over 90 days.

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

Tri Pointe Homes  vs.  THAI BEVERAGE

Tri Pointe Homes

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tri Pointe Homes 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.

THAI BEVERAGE

Risk-Adjusted Performance

Very Weak

Over the last 90 days THAI BEVERAGE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, THAI BEVERAGE is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Tri Pointe and THAI BEVERAGE

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

The idea behind Tri Pointe Homes and THAI BEVERAGE 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.