Correlation Between Thai Vegetable and NSL Foods

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

Diversification Opportunities for Thai Vegetable and NSL Foods

0.65

Correlation Coefficient

Thai Vegetable  NSL Foods

Poor diversification

The 3 months correlation between Thai and NSL is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Thai Vegetable Oil and NSL Foods Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NSL Foods 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 NSL Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NSL Foods Public has no effect on the direction of Thai Vegetable i.e., Thai Vegetable and NSL Foods go up and down completely randomly.

Pair Corralation between Thai Vegetable and NSL Foods

Assuming the 90 days trading horizon Thai Vegetable Oil is expected to under-perform the NSL Foods. But the stock apears to be less risky and, when comparing its historical volatility, Thai Vegetable Oil is 3.74 times less risky than NSL Foods. The stock trades about -0.79 of its potential returns per unit of risk. The NSL Foods Public is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,225  in NSL Foods Public on September 3, 2024 and sell it today you would earn a total of  0.00  from holding NSL Foods Public or generate 0.0% 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.  NSL Foods Public

Thai Vegetable Oil

Risk-Adjusted Performance

3 of 100

Insignificant

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

NSL Foods Public

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NSL Foods Public are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, NSL Foods may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Thai Vegetable and NSL Foods

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

The idea behind Thai Vegetable Oil and NSL Foods 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.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.