Correlation Between Thai Beverage and CSL

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

By analyzing existing cross correlation between Thai Beverage Public and CSL LTD SPONADR, you can compare the effects of market volatilities on Thai Beverage and CSL 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 Beverage with a short position of CSL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thai Beverage and CSL.

Diversification Opportunities for Thai Beverage and CSL

-0.21

Correlation Coefficient

Thai Beverage  CSL

Very good diversification

The 3 months correlation between Thai and CSL is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Thai Beverage Public and CSL LTD SPONADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSL LTD SPONADR and Thai Beverage 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 Beverage Public are associated (or correlated) with CSL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSL LTD SPONADR has no effect on the direction of Thai Beverage i.e., Thai Beverage and CSL go up and down completely randomly.

Pair Corralation between Thai Beverage and CSL

Assuming the 90 days horizon Thai Beverage Public is expected to generate 2.09 times more return on investment than CSL. However, Thai Beverage is 2.09 times more volatile than CSL LTD SPONADR. It trades about 0.01 of its potential returns per unit of risk. CSL LTD SPONADR is currently generating about -0.07 per unit of risk. If you would invest  38.00  in Thai Beverage Public on September 23, 2024 and sell it today you would earn a total of  0.00  from holding Thai Beverage Public or generate 0.0% return on investment over 90 days.

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

Thai Beverage Public  vs.  CSL LTD SPONADR

Thai Beverage Public

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Thai Beverage Public are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Thai Beverage is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

CSL LTD SPONADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CSL LTD SPONADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking indicators, CSL is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Thai Beverage and CSL

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

The idea behind Thai Beverage Public and CSL LTD SPONADR 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.