Correlation Between Thai Vegetable and VGI Public

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

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

Diversification Opportunities for Thai Vegetable and VGI Public

-0.25

Correlation Coefficient

Thai Vegetable  VGI Public

Very good diversification

The 3 months correlation between Thai and VGI is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Thai Vegetable Oil and VGI Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VGI Public and Thai Vegetable 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 Vegetable Oil are associated (or correlated) with VGI Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VGI Public has no effect on the direction of Thai Vegetable i.e., Thai Vegetable and VGI Public go up and down completely randomly.

Pair Corralation between Thai Vegetable and VGI Public

Assuming the 90 days trading horizon Thai Vegetable Oil is expected to generate 30.18 times more return on investment than VGI Public. However, Thai Vegetable is 30.18 times more volatile than VGI Public. It trades about 0.11 of its potential returns per unit of risk. VGI Public is currently generating about 0.02 per unit of risk. If you would invest  2,535  in Thai Vegetable Oil on September 14, 2024 and sell it today you would lose (245.00) from holding Thai Vegetable Oil or give up 9.66% of portfolio value over 90 days.

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

Thai Vegetable Oil  vs.  VGI Public

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.

VGI Public

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in VGI Public are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward indicators, VGI Public is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Thai Vegetable and VGI Public

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

The idea behind Thai Vegetable Oil and VGI 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.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.