Correlation Between THAI BEVERAGE and British American
Can any of the company-specific risk be diversified away by investing in both THAI BEVERAGE and British American 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 British American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between THAI BEVERAGE and British American Tobacco, you can compare the effects of market volatilities on THAI BEVERAGE and British American 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 British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of THAI BEVERAGE and British American.
Diversification Opportunities for THAI BEVERAGE and British American
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between THAI and British is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding THAI BEVERAGE and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco 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 are associated (or correlated) with British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of THAI BEVERAGE i.e., THAI BEVERAGE and British American go up and down completely randomly.
Pair Corralation between THAI BEVERAGE and British American
Assuming the 90 days trading horizon THAI BEVERAGE is expected to generate 3.93 times more return on investment than British American. However, THAI BEVERAGE is 3.93 times more volatile than British American Tobacco. It trades about 0.06 of its potential returns per unit of risk. British American Tobacco is currently generating about 0.07 per unit of risk. If you would invest 20.00 in THAI BEVERAGE on September 1, 2024 and sell it today you would earn a total of 19.00 from holding THAI BEVERAGE or generate 95.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
THAI BEVERAGE vs. British American Tobacco
Performance |
| Timeline |
| THAI BEVERAGE |
| British American Tobacco |
THAI BEVERAGE and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with THAI BEVERAGE and British American
The main advantage of trading using opposite THAI BEVERAGE and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if THAI BEVERAGE position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.| THAI BEVERAGE vs. RYU Apparel | THAI BEVERAGE vs. SPORTING | THAI BEVERAGE vs. Big 5 Sporting | THAI BEVERAGE vs. COLUMBIA SPORTSWEAR |
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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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