Correlation Between Alto Ingredients and Thai Beverage

Can any of the company-specific risk be diversified away by investing in both Alto Ingredients 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 Alto Ingredients and Thai Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alto Ingredients and Thai Beverage PCL, you can compare the effects of market volatilities on Alto Ingredients 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 Alto Ingredients with a short position of Thai Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alto Ingredients and Thai Beverage.

Diversification Opportunities for Alto Ingredients and Thai Beverage

0.09

Correlation Coefficient

Alto Ingredients  Thai Beverage

Significant diversification

The 3 months correlation between Alto and Thai is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Alto Ingredients and Thai Beverage PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Beverage PCL and Alto Ingredients 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 Alto Ingredients 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 PCL has no effect on the direction of Alto Ingredients i.e., Alto Ingredients and Thai Beverage go up and down completely randomly.

Pair Corralation between Alto Ingredients and Thai Beverage

Given the investment horizon of 90 days Alto Ingredients is expected to under-perform the Thai Beverage. In addition to that, Alto Ingredients is 4.47 times more volatile than Thai Beverage PCL. It trades about -0.31 of its total potential returns per unit of risk. Thai Beverage PCL is currently generating about -0.21 per unit of volatility. If you would invest  3,600  in Thai Beverage PCL on February 5, 2024 and sell it today you would lose (80.00) from holding Thai Beverage PCL or give up 2.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Alto Ingredients  vs.  Thai Beverage PCL

Alto Ingredients

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alto Ingredients are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Alto Ingredients may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Thai Beverage PCL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thai Beverage PCL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Alto Ingredients and Thai Beverage

The main advantage of trading using opposite Alto Ingredients and Thai Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alto Ingredients 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 Alto Ingredients and Thai Beverage PCL 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 Global Correlations module to find global opportunities by holding instruments from different markets.