Correlation Between Thai Vegetable and Airports

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

Diversification Opportunities for Thai Vegetable and Airports

0.31

Correlation Coefficient

Thai Vegetable  Airports

Weak diversification

The 3 months correlation between Thai and Airports is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Thai Vegetable Oil and Airports of Thailand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airports of Thailand 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 Airports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airports of Thailand has no effect on the direction of Thai Vegetable i.e., Thai Vegetable and Airports go up and down completely randomly.

Pair Corralation between Thai Vegetable and Airports

Assuming the 90 days trading horizon Thai Vegetable Oil is expected to under-perform the Airports. In addition to that, Thai Vegetable is 1.13 times more volatile than Airports of Thailand. It trades about -0.1 of its total potential returns per unit of risk. Airports of Thailand is currently generating about 0.01 per unit of volatility. If you would invest  6,121  in Airports of Thailand on September 12, 2024 and sell it today you would earn a total of  29.00  from holding Airports of Thailand or generate 0.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Thai Vegetable Oil  vs.  Airports of Thailand

Thai Vegetable Oil

Risk-Adjusted Performance

0 of 100

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 latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Airports of Thailand

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Airports of Thailand has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Airports 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 Airports

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

The idea behind Thai Vegetable Oil and Airports of Thailand 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.