Correlation Between Thai Vegetable and United Paper

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

Diversification Opportunities for Thai Vegetable and United Paper

0.74

Correlation Coefficient

Thai Vegetable  United Paper

Poor diversification

The 3 months correlation between Thai and United is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Thai Vegetable Oil and United Paper Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Paper 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 United Paper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Paper Public has no effect on the direction of Thai Vegetable i.e., Thai Vegetable and United Paper go up and down completely randomly.

Pair Corralation between Thai Vegetable and United Paper

Assuming the 90 days trading horizon Thai Vegetable Oil is expected to under-perform the United Paper. In addition to that, Thai Vegetable is 1.37 times more volatile than United Paper Public. It trades about -0.01 of its total potential returns per unit of risk. United Paper Public is currently generating about 0.08 per unit of volatility. If you would invest  756.00  in United Paper Public on December 29, 2024 and sell it today you would earn a total of  29.00  from holding United Paper Public or generate 3.84% 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.  United Paper 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.

United Paper Public

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in United Paper Public are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, United Paper 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 United Paper

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

The idea behind Thai Vegetable Oil and United Paper 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.