Correlation Between Thai Life and Exotic Food

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

By analyzing existing cross correlation between Thai Life Insurance and Exotic Food Public, you can compare the effects of market volatilities on Thai Life and Exotic Food 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 Life with a short position of Exotic Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thai Life and Exotic Food.

Diversification Opportunities for Thai Life and Exotic Food

-0.35

Correlation Coefficient

Thai Life  Exotic Food

Very good diversification

The 3 months correlation between Thai and Exotic is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Thai Life Insurance and Exotic Food Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exotic Food Public and Thai Life 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 Life Insurance are associated (or correlated) with Exotic Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exotic Food Public has no effect on the direction of Thai Life i.e., Thai Life and Exotic Food go up and down completely randomly.

Pair Corralation between Thai Life and Exotic Food

Assuming the 90 days trading horizon Thai Life Insurance is expected to generate 1.5 times more return on investment than Exotic Food. However, Thai Life is 1.5 times more volatile than Exotic Food Public. It trades about 0.17 of its potential returns per unit of risk. Exotic Food Public is currently generating about -0.22 per unit of risk. If you would invest  865.00  in Thai Life Insurance on September 13, 2024 and sell it today you would earn a total of  235.00  from holding Thai Life Insurance or generate 27.17% return on investment over 90 days.

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

Thai Life Insurance  vs.  Exotic Food Public

Thai Life Insurance

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Thai Life Insurance are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward indicators, Thai Life disclosed solid returns over the last few months and may actually be approaching a breakup point.

Exotic Food Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Exotic Food Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Thai Life and Exotic Food

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

The idea behind Thai Life Insurance and Exotic Food Public 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.