Correlation Between Thai Vegetable and Minor International

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

Diversification Opportunities for Thai Vegetable and Minor International

0.7

Correlation Coefficient

Thai Vegetable  Minor International

Poor diversification

The 3 months correlation between Thai and Minor is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Thai Vegetable Oil and Minor International Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Minor International 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 Minor International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Minor International has no effect on the direction of Thai Vegetable i.e., Thai Vegetable and Minor International go up and down completely randomly.

Pair Corralation between Thai Vegetable and Minor International

Assuming the 90 days trading horizon Thai Vegetable Oil is expected to under-perform the Minor International. But the stock apears to be less risky and, when comparing its historical volatility, Thai Vegetable Oil is 1.45 times less risky than Minor International. The stock trades about -0.01 of its potential returns per unit of risk. The Minor International Public is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,600  in Minor International Public on December 29, 2024 and sell it today you would earn a total of  50.00  from holding Minor International Public or generate 1.92% return on investment over 90 days.

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

Thai Vegetable Oil  vs.  Minor International Public

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.

Minor International

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Minor International Public are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Minor International 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 Minor International

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

The idea behind Thai Vegetable Oil and Minor International 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 Transaction History module to view history of all your transactions and understand their impact on performance.