Correlation Between Thai Coating and Nova Organic

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

By analyzing existing cross correlation between Thai Coating Industrial and Nova Organic PCL, you can compare the effects of market volatilities on Thai Coating and Nova Organic 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 Coating with a short position of Nova Organic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thai Coating and Nova Organic.

Diversification Opportunities for Thai Coating and Nova Organic

0.2

Correlation Coefficient

Thai Coating  Nova Organic

Modest diversification

The 3 months correlation between Thai and Nova is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Thai Coating Industrial and Nova Organic PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Organic PCL and Thai Coating 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 Coating Industrial are associated (or correlated) with Nova Organic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Organic PCL has no effect on the direction of Thai Coating i.e., Thai Coating and Nova Organic go up and down completely randomly.

Pair Corralation between Thai Coating and Nova Organic

Assuming the 90 days trading horizon Thai Coating Industrial is expected to generate 0.9 times more return on investment than Nova Organic. However, Thai Coating Industrial is 1.11 times less risky than Nova Organic. It trades about -0.02 of its potential returns per unit of risk. Nova Organic PCL is currently generating about -0.02 per unit of risk. If you would invest  2,800  in Thai Coating Industrial on December 29, 2024 and sell it today you would lose (300.00) from holding Thai Coating Industrial or give up 10.71% of portfolio value over 90 days.

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

Thai Coating Industrial  vs.  Nova Organic PCL

Thai Coating Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Thai Coating Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Thai Coating is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Nova Organic PCL

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nova Organic PCL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental drivers remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Thai Coating and Nova Organic

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

The idea behind Thai Coating Industrial and Nova Organic PCL 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.