Correlation Between Thai Vegetable and Chumporn Palm

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

Diversification Opportunities for Thai Vegetable and Chumporn Palm

0.56

Correlation Coefficient

Thai Vegetable  Chumporn Palm

Very weak diversification

The 3 months correlation between Thai and Chumporn is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Thai Vegetable Oil and Chumporn Palm Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chumporn Palm Oil 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 Chumporn Palm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chumporn Palm Oil has no effect on the direction of Thai Vegetable i.e., Thai Vegetable and Chumporn Palm go up and down completely randomly.

Pair Corralation between Thai Vegetable and Chumporn Palm

Assuming the 90 days trading horizon Thai Vegetable Oil is expected to under-perform the Chumporn Palm. In addition to that, Thai Vegetable is 1.08 times more volatile than Chumporn Palm Oil. It trades about -0.01 of its total potential returns per unit of risk. Chumporn Palm Oil is currently generating about 0.05 per unit of volatility. If you would invest  268.00  in Chumporn Palm Oil on December 29, 2024 and sell it today you would earn a total of  8.00  from holding Chumporn Palm Oil or generate 2.99% return on investment over 90 days.

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

Thai Vegetable Oil  vs.  Chumporn Palm Oil

Thai Vegetable Oil

Risk-Adjusted Performance

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 quite persistent basic indicators, Thai Vegetable is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Chumporn Palm Oil

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chumporn Palm Oil are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward indicators, Chumporn Palm 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 Vegetable and Chumporn Palm

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

The idea behind Thai Vegetable Oil and Chumporn Palm 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.