Correlation Between Thai Union and Thai Vegetable

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

By analyzing existing cross correlation between Thai Union Group and Thai Vegetable Oil, you can compare the effects of market volatilities on Thai Union and Thai Vegetable 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 Union with a short position of Thai Vegetable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thai Union and Thai Vegetable.

Diversification Opportunities for Thai Union and Thai Vegetable

0.91

Correlation Coefficient

Thai Union  Thai Vegetable

Almost no diversification

The 3 months correlation between Thai and Thai is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Thai Union Group and Thai Vegetable Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Vegetable Oil and Thai Union 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 Union Group are associated (or correlated) with Thai Vegetable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Vegetable Oil has no effect on the direction of Thai Union i.e., Thai Union and Thai Vegetable go up and down completely randomly.

Pair Corralation between Thai Union and Thai Vegetable

Assuming the 90 days trading horizon Thai Union Group is expected to generate 1.0 times more return on investment than Thai Vegetable. However, Thai Union Group is 1.0 times less risky than Thai Vegetable. It trades about 0.12 of its potential returns per unit of risk. Thai Vegetable Oil is currently generating about 0.11 per unit of risk. If you would invest  1,301  in Thai Union Group on September 14, 2024 and sell it today you would earn a total of  9.00  from holding Thai Union Group or generate 0.69% return on investment over 90 days.

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

Thai Union Group  vs.  Thai Vegetable Oil

Thai Union Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Thai Union Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, Thai Union disclosed solid returns over the last few months and may actually be approaching a breakup point.

Thai Vegetable Oil

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Thai Vegetable Oil are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental drivers, Thai Vegetable sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Thai Union and Thai Vegetable

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

The idea behind Thai Union Group and Thai Vegetable Oil 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.