Correlation Between Therma Bright and Premium Brands

Can any of the company-specific risk be diversified away by investing in both Therma Bright and Premium Brands 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 Therma Bright and Premium Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Therma Bright and Premium Brands Holdings, you can compare the effects of market volatilities on Therma Bright and Premium Brands 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 Therma Bright with a short position of Premium Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Therma Bright and Premium Brands.

Diversification Opportunities for Therma Bright and Premium Brands

-0.15

Correlation Coefficient

Therma Bright  Premium Brands

Good diversification

The 3 months correlation between Therma and Premium is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Therma Bright and Premium Brands Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premium Brands Holdings and Therma Bright 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 Therma Bright are associated (or correlated) with Premium Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premium Brands Holdings has no effect on the direction of Therma Bright i.e., Therma Bright and Premium Brands go up and down completely randomly.

Pair Corralation between Therma Bright and Premium Brands

Assuming the 90 days trading horizon Therma Bright is expected to generate 14.03 times more return on investment than Premium Brands. However, Therma Bright is 14.03 times more volatile than Premium Brands Holdings. It trades about 0.1 of its potential returns per unit of risk. Premium Brands Holdings is currently generating about -0.06 per unit of risk. If you would invest  2.50  in Therma Bright on December 3, 2024 and sell it today you would earn a total of  1.00  from holding Therma Bright or generate 40.0% return on investment over 90 days.

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

Therma Bright  vs.  Premium Brands Holdings

Therma Bright

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Therma Bright are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Therma Bright showed solid returns over the last few months and may actually be approaching a breakup point.

Premium Brands Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Premium Brands Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Premium Brands is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Therma Bright and Premium Brands

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

The idea behind Therma Bright and Premium Brands Holdings 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.