Correlation Between ITALIAN WINE and THAI BEVERAGE

Can any of the company-specific risk be diversified away by investing in both ITALIAN WINE 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 ITALIAN WINE and THAI BEVERAGE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ITALIAN WINE BRANDS and THAI BEVERAGE, you can compare the effects of market volatilities on ITALIAN WINE 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 ITALIAN WINE with a short position of THAI BEVERAGE. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITALIAN WINE and THAI BEVERAGE.

Diversification Opportunities for ITALIAN WINE and THAI BEVERAGE

-0.43

Correlation Coefficient

ITALIAN WINE  THAI BEVERAGE

Very good diversification

The 3 months correlation between ITALIAN and THAI is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding ITALIAN WINE BRANDS and THAI BEVERAGE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THAI BEVERAGE and ITALIAN WINE 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 ITALIAN WINE BRANDS 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 ITALIAN WINE i.e., ITALIAN WINE and THAI BEVERAGE go up and down completely randomly.

Pair Corralation between ITALIAN WINE and THAI BEVERAGE

Assuming the 90 days horizon ITALIAN WINE BRANDS is expected to generate 0.5 times more return on investment than THAI BEVERAGE. However, ITALIAN WINE BRANDS is 1.98 times less risky than THAI BEVERAGE. It trades about 0.04 of its potential returns per unit of risk. THAI BEVERAGE is currently generating about -0.06 per unit of risk. If you would invest  1,901  in ITALIAN WINE BRANDS on May 5, 2025 and sell it today you would earn a total of  39.00  from holding ITALIAN WINE BRANDS or generate 2.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

ITALIAN WINE BRANDS  vs.  THAI BEVERAGE

ITALIAN WINE BRANDS

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ITALIAN WINE BRANDS are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ITALIAN WINE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

THAI BEVERAGE

Risk-Adjusted Performance

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 latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with ITALIAN WINE and THAI BEVERAGE

The main advantage of trading using opposite ITALIAN WINE and THAI BEVERAGE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITALIAN WINE 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 ITALIAN WINE BRANDS 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.