Correlation Between Thai Beverage and Healthy Choice

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

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

Diversification Opportunities for Thai Beverage and Healthy Choice

-0.75

Correlation Coefficient

Thai Beverage  Healthy Choice

Pay attention - limited upside

The 3 months correlation between Thai and Healthy is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Thai Beverage PCL and Healthy Choice Wellness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthy Choice Wellness 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 PCL are associated (or correlated) with Healthy Choice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthy Choice Wellness has no effect on the direction of Thai Beverage i.e., Thai Beverage and Healthy Choice go up and down completely randomly.

Pair Corralation between Thai Beverage and Healthy Choice

Assuming the 90 days horizon Thai Beverage is expected to generate 1.28 times less return on investment than Healthy Choice. But when comparing it to its historical volatility, Thai Beverage PCL is 25.06 times less risky than Healthy Choice. It trades about 0.13 of its potential returns per unit of risk. Healthy Choice Wellness is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  82.00  in Healthy Choice Wellness on December 19, 2024 and sell it today you would lose (27.00) from holding Healthy Choice Wellness or give up 32.93% of portfolio value over 90 days.

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

Thai Beverage PCL  vs.  Healthy Choice Wellness

Thai Beverage PCL

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Thai Beverage PCL are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Thai Beverage is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Healthy Choice Wellness

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Thai Beverage and Healthy Choice

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

The idea behind Thai Beverage PCL and Healthy Choice Wellness 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.