Correlation Between Thai Vegetable and Univanich Palm

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

Diversification Opportunities for Thai Vegetable and Univanich Palm

0.08

Correlation Coefficient

Thai Vegetable  Univanich Palm

Significant diversification

The 3 months correlation between Thai and Univanich is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Thai Vegetable Oil and Univanich Palm Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Univanich Palm Oil 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 Univanich Palm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Univanich Palm Oil has no effect on the direction of Thai Vegetable i.e., Thai Vegetable and Univanich Palm go up and down completely randomly.

Pair Corralation between Thai Vegetable and Univanich Palm

Assuming the 90 days trading horizon Thai Vegetable Oil is expected to under-perform the Univanich Palm. But the stock apears to be less risky and, when comparing its historical volatility, Thai Vegetable Oil is 1.29 times less risky than Univanich Palm. The stock trades about -0.01 of its potential returns per unit of risk. The Univanich Palm Oil is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  863.00  in Univanich Palm Oil on December 30, 2024 and sell it today you would earn a total of  52.00  from holding Univanich Palm Oil or generate 6.03% return on investment over 90 days.

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

Thai Vegetable Oil  vs.  Univanich Palm Oil

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.

Univanich Palm Oil

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Univanich Palm Oil are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Univanich Palm may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Thai Vegetable and Univanich Palm

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

The idea behind Thai Vegetable Oil and Univanich Palm Oil 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..