Correlation Between Thai Union and MK Restaurant

Can any of the company-specific risk be diversified away by investing in both Thai Union and MK Restaurant 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 MK Restaurant 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 MK Restaurant Group, you can compare the effects of market volatilities on Thai Union and MK Restaurant 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 MK Restaurant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thai Union and MK Restaurant.

Diversification Opportunities for Thai Union and MK Restaurant

0.27

Correlation Coefficient

Thai Union  MK Restaurant

Modest diversification

The 3 months correlation between Thai and MK Restaurant is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Thai Union Group and MK Restaurant Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MK Restaurant Group 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 MK Restaurant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MK Restaurant Group has no effect on the direction of Thai Union i.e., Thai Union and MK Restaurant go up and down completely randomly.

Pair Corralation between Thai Union and MK Restaurant

Assuming the 90 days horizon Thai Union Group is expected to generate 74.3 times more return on investment than MK Restaurant. However, Thai Union is 74.3 times more volatile than MK Restaurant Group. It trades about 0.11 of its potential returns per unit of risk. MK Restaurant Group is currently generating about -0.04 per unit of risk. If you would invest  1,570  in Thai Union Group on September 1, 2024 and sell it today you would lose (200.00) from holding Thai Union Group or give up 12.74% of portfolio value over 90 days.

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

Thai Union Group  vs.  MK Restaurant Group

Thai Union Group

Risk-Adjusted Performance

8 of 100

OK

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

MK Restaurant Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MK Restaurant Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, MK Restaurant is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Thai Union and MK Restaurant

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

The idea behind Thai Union Group and MK Restaurant Group 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.