Correlation Between Cars and THAI BEVERAGE

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Can any of the company-specific risk be diversified away by investing in both Cars and THAI BEVERAGE 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 Cars and THAI BEVERAGE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cars Inc and THAI BEVERAGE, you can compare the effects of market volatilities on Cars and THAI BEVERAGE 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 Cars with a short position of THAI BEVERAGE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cars and THAI BEVERAGE.

Diversification Opportunities for Cars and THAI BEVERAGE

0.47
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Cars and THAI is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and THAI BEVERAGE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THAI BEVERAGE and Cars 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 Cars Inc are associated (or correlated) with THAI BEVERAGE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of THAI BEVERAGE has no effect on the direction of Cars i.e., Cars and THAI BEVERAGE go up and down completely randomly.

Pair Corralation between Cars and THAI BEVERAGE

Assuming the 90 days horizon Cars is expected to generate 4.48 times less return on investment than THAI BEVERAGE. But when comparing it to its historical volatility, Cars Inc is 1.78 times less risky than THAI BEVERAGE. It trades about 0.02 of its potential returns per unit of risk. THAI BEVERAGE is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  15.00  in THAI BEVERAGE on October 13, 2024 and sell it today you would earn a total of  21.00  from holding THAI BEVERAGE or generate 140.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy99.8%
ValuesDaily Returns

Cars Inc  vs.  THAI BEVERAGE

 Performance 
       Timeline  
Cars Inc 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Cars Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Cars reported solid returns over the last few months and may actually be approaching a breakup point.
THAI BEVERAGE 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days THAI BEVERAGE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, THAI BEVERAGE is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Cars and THAI BEVERAGE Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cars and THAI BEVERAGE

The main advantage of trading using opposite Cars and THAI BEVERAGE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cars position performs unexpectedly, THAI BEVERAGE 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 THAI BEVERAGE will offset losses from the drop in THAI BEVERAGE's long position.
The idea behind Cars Inc and THAI BEVERAGE 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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