Correlation Between Thai Vegetable and Chiangmai Frozen

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

Diversification Opportunities for Thai Vegetable and Chiangmai Frozen

0.96

Correlation Coefficient

Thai Vegetable  Chiangmai Frozen

Almost no diversification

The 3 months correlation between Thai and Chiangmai is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Thai Vegetable Oil and Chiangmai Frozen Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chiangmai Frozen Foods 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 Chiangmai Frozen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chiangmai Frozen Foods has no effect on the direction of Thai Vegetable i.e., Thai Vegetable and Chiangmai Frozen go up and down completely randomly.

Pair Corralation between Thai Vegetable and Chiangmai Frozen

Assuming the 90 days trading horizon Thai Vegetable Oil is expected to generate 0.7 times more return on investment than Chiangmai Frozen. However, Thai Vegetable Oil is 1.42 times less risky than Chiangmai Frozen. It trades about -0.31 of its potential returns per unit of risk. Chiangmai Frozen Foods is currently generating about -0.28 per unit of risk. If you would invest  2,450  in Thai Vegetable Oil on October 26, 2024 and sell it today you would lose (350.00) from holding Thai Vegetable Oil or give up 14.29% of portfolio value over 90 days.

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

Thai Vegetable Oil  vs.  Chiangmai Frozen Foods

Thai Vegetable Oil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thai Vegetable Oil 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 basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Chiangmai Frozen Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chiangmai Frozen Foods 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 February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Thai Vegetable and Chiangmai Frozen

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

The idea behind Thai Vegetable Oil and Chiangmai Frozen Foods 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.