Correlation Between Thai Vegetable and RB Food

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

Diversification Opportunities for Thai Vegetable and RB Food

-0.6

Correlation Coefficient

Thai Vegetable  RB Food

Excellent diversification

The 3 months correlation between Thai and RBF is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Thai Vegetable Oil and RB Food Supply in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RB Food Supply 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 RB Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RB Food Supply has no effect on the direction of Thai Vegetable i.e., Thai Vegetable and RB Food go up and down completely randomly.

Pair Corralation between Thai Vegetable and RB Food

Assuming the 90 days trading horizon Thai Vegetable Oil is expected to under-perform the RB Food. But the stock apears to be less risky and, when comparing its historical volatility, Thai Vegetable Oil is 2.77 times less risky than RB Food. The stock trades about -0.06 of its potential returns per unit of risk. The RB Food Supply is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  635.00  in RB Food Supply on September 14, 2024 and sell it today you would earn a total of  25.00  from holding RB Food Supply or generate 3.94% return on investment over 90 days.

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

Thai Vegetable Oil  vs.  RB Food Supply

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 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.

RB Food Supply

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in RB Food Supply are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting technical and fundamental indicators, RB Food may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Thai Vegetable and RB Food

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

The idea behind Thai Vegetable Oil and RB Food Supply 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.