Correlation Between Nova Organic and Bangkok Commercial

Can any of the company-specific risk be diversified away by investing in both Nova Organic and Bangkok Commercial 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 Nova Organic and Bangkok Commercial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nova Organic PCL and Bangkok Commercial Asset, you can compare the effects of market volatilities on Nova Organic and Bangkok Commercial 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 Nova Organic with a short position of Bangkok Commercial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nova Organic and Bangkok Commercial.

Diversification Opportunities for Nova Organic and Bangkok Commercial

0.87

Correlation Coefficient

Nova Organic  Bangkok Commercial

Very poor diversification

The 3 months correlation between Nova and Bangkok is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Nova Organic PCL and Bangkok Commercial Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bangkok Commercial Asset and Nova Organic 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 Nova Organic PCL are associated (or correlated) with Bangkok Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bangkok Commercial Asset has no effect on the direction of Nova Organic i.e., Nova Organic and Bangkok Commercial go up and down completely randomly.

Pair Corralation between Nova Organic and Bangkok Commercial

Assuming the 90 days horizon Nova Organic PCL is expected to generate 1.63 times more return on investment than Bangkok Commercial. However, Nova Organic is 1.63 times more volatile than Bangkok Commercial Asset. It trades about -0.01 of its potential returns per unit of risk. Bangkok Commercial Asset is currently generating about -0.23 per unit of risk. If you would invest  116.00  in Nova Organic PCL on September 13, 2024 and sell it today you would lose (8.00) from holding Nova Organic PCL or give up 6.9% of portfolio value over 90 days.

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

Nova Organic PCL  vs.  Bangkok Commercial Asset

Nova Organic PCL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nova Organic PCL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, Nova Organic is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Bangkok Commercial Asset

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bangkok Commercial Asset has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's primary indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Nova Organic and Bangkok Commercial

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

The idea behind Nova Organic PCL and Bangkok Commercial Asset 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.