Correlation Between TH International and Reborn Coffee

Can any of the company-specific risk be diversified away by investing in both TH International and Reborn Coffee 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 TH International and Reborn Coffee into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TH International Limited and Reborn Coffee, you can compare the effects of market volatilities on TH International and Reborn Coffee 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 TH International with a short position of Reborn Coffee. Check out your portfolio center. Please also check ongoing floating volatility patterns of TH International and Reborn Coffee.

Diversification Opportunities for TH International and Reborn Coffee

0.62

Correlation Coefficient

TH International  Reborn Coffee

Poor diversification

The 3 months correlation between THCH and Reborn is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding TH International Limited and Reborn Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reborn Coffee and TH International 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 TH International Limited are associated (or correlated) with Reborn Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reborn Coffee has no effect on the direction of TH International i.e., TH International and Reborn Coffee go up and down completely randomly.

Pair Corralation between TH International and Reborn Coffee

Given the investment horizon of 90 days TH International Limited is expected to under-perform the Reborn Coffee. But the stock apears to be less risky and, when comparing its historical volatility, TH International Limited is 2.53 times less risky than Reborn Coffee. The stock trades about -0.08 of its potential returns per unit of risk. The Reborn Coffee is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  432.00  in Reborn Coffee on June 23, 2024 and sell it today you would lose (129.00) from holding Reborn Coffee or give up 29.86% of portfolio value over 90 days.

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

TH International Limited  vs.  Reborn Coffee

TH International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TH International Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in October 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Reborn Coffee

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reborn Coffee has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental drivers remain very healthy which may send shares a bit higher in October 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with TH International and Reborn Coffee

The main advantage of trading using opposite TH International and Reborn Coffee positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TH International position performs unexpectedly, Reborn Coffee 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 Reborn Coffee will offset losses from the drop in Reborn Coffee's long position.

The idea behind TH International Limited and Reborn Coffee 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.