Correlation Between Thai Vegetable and Thai Reinsurance

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

Diversification Opportunities for Thai Vegetable and Thai Reinsurance

0.52

Correlation Coefficient

Thai Vegetable  Thai Reinsurance

Very weak diversification

The 3 months correlation between Thai and Thai is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Thai Vegetable Oil and Thai Reinsurance Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Reinsurance 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 Thai Reinsurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Reinsurance Public has no effect on the direction of Thai Vegetable i.e., Thai Vegetable and Thai Reinsurance go up and down completely randomly.

Pair Corralation between Thai Vegetable and Thai Reinsurance

Assuming the 90 days trading horizon Thai Vegetable Oil is expected to generate 0.51 times more return on investment than Thai Reinsurance. However, Thai Vegetable Oil is 1.97 times less risky than Thai Reinsurance. It trades about 0.04 of its potential returns per unit of risk. Thai Reinsurance Public is currently generating about 0.01 per unit of risk. If you would invest  2,230  in Thai Vegetable Oil on September 4, 2024 and sell it today you would earn a total of  50.00  from holding Thai Vegetable Oil or generate 2.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Thai Vegetable Oil  vs.  Thai Reinsurance Public

Thai Vegetable Oil

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Thai Vegetable Oil are ranked lower than 2 (%) 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.

Thai Reinsurance Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thai Reinsurance Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Thai Reinsurance 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 Thai Reinsurance

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

The idea behind Thai Vegetable Oil and Thai Reinsurance 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 Global Correlations module to find global opportunities by holding instruments from different markets.