Correlation Between THAI BEVERAGE and MELIA HOTELS
Can any of the company-specific risk be diversified away by investing in both THAI BEVERAGE and MELIA HOTELS 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 MELIA HOTELS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between THAI BEVERAGE and MELIA HOTELS, you can compare the effects of market volatilities on THAI BEVERAGE and MELIA HOTELS 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 MELIA HOTELS. Check out your portfolio center. Please also check ongoing floating volatility patterns of THAI BEVERAGE and MELIA HOTELS.
Diversification Opportunities for THAI BEVERAGE and MELIA HOTELS
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between THAI and MELIA is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding THAI BEVERAGE and MELIA HOTELS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MELIA HOTELS 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 MELIA HOTELS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MELIA HOTELS has no effect on the direction of THAI BEVERAGE i.e., THAI BEVERAGE and MELIA HOTELS go up and down completely randomly.
Pair Corralation between THAI BEVERAGE and MELIA HOTELS
Assuming the 90 days trading horizon THAI BEVERAGE is expected to generate 2.38 times more return on investment than MELIA HOTELS. However, THAI BEVERAGE is 2.38 times more volatile than MELIA HOTELS. It trades about 0.06 of its potential returns per unit of risk. MELIA HOTELS is currently generating about 0.04 per unit of risk. If you would invest 15.00 in THAI BEVERAGE on September 3, 2024 and sell it today you would earn a total of 24.00 from holding THAI BEVERAGE or generate 160.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
THAI BEVERAGE vs. MELIA HOTELS
Performance |
| Timeline |
| THAI BEVERAGE |
| MELIA HOTELS |
THAI BEVERAGE and MELIA HOTELS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with THAI BEVERAGE and MELIA HOTELS
The main advantage of trading using opposite THAI BEVERAGE and MELIA HOTELS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if THAI BEVERAGE position performs unexpectedly, MELIA HOTELS 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 MELIA HOTELS will offset losses from the drop in MELIA HOTELS's long position.| THAI BEVERAGE vs. Ramsay Health Care | THAI BEVERAGE vs. National Health Investors | THAI BEVERAGE vs. Air Transport Services | THAI BEVERAGE vs. Texas Roadhouse |
| MELIA HOTELS vs. TOTAL GABON | MELIA HOTELS vs. Walgreens Boots Alliance | MELIA HOTELS vs. Peak Resources Limited |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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