Correlation Between THAI BEVERAGE and Coffee Holding
Can any of the company-specific risk be diversified away by investing in both THAI BEVERAGE and Coffee Holding 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 Coffee Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between THAI BEVERAGE and Coffee Holding Co, you can compare the effects of market volatilities on THAI BEVERAGE and Coffee Holding 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 Coffee Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of THAI BEVERAGE and Coffee Holding.
Diversification Opportunities for THAI BEVERAGE and Coffee Holding
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between THAI and Coffee is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding THAI BEVERAGE and Coffee Holding Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coffee Holding 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 Coffee Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coffee Holding has no effect on the direction of THAI BEVERAGE i.e., THAI BEVERAGE and Coffee Holding go up and down completely randomly.
Pair Corralation between THAI BEVERAGE and Coffee Holding
Assuming the 90 days trading horizon THAI BEVERAGE is expected to generate 0.35 times more return on investment than Coffee Holding. However, THAI BEVERAGE is 2.84 times less risky than Coffee Holding. It trades about -0.08 of its potential returns per unit of risk. Coffee Holding Co is currently generating about -0.15 per unit of risk. If you would invest 38.00 in THAI BEVERAGE on October 16, 2024 and sell it today you would lose (1.00) from holding THAI BEVERAGE or give up 2.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.12% |
| Values | Daily Returns |
THAI BEVERAGE vs. Coffee Holding Co
Performance |
| Timeline |
| THAI BEVERAGE |
| Coffee Holding |
THAI BEVERAGE and Coffee Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with THAI BEVERAGE and Coffee Holding
The main advantage of trading using opposite THAI BEVERAGE and Coffee Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if THAI BEVERAGE position performs unexpectedly, Coffee Holding 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 Coffee Holding will offset losses from the drop in Coffee Holding's long position.| THAI BEVERAGE vs. NIGHTINGALE HEALTH EO | THAI BEVERAGE vs. EPSILON HEALTHCARE LTD | THAI BEVERAGE vs. STMICROELECTRONICS | THAI BEVERAGE vs. EIDESVIK OFFSHORE NK |
| Coffee Holding vs. EBRO FOODS | Coffee Holding vs. Astral Foods Limited | Coffee Holding vs. THAI BEVERAGE | Coffee Holding vs. CN MODERN DAIRY |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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