Correlation Between Bank of Ayudhya and Bangkok Bank

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

By analyzing existing cross correlation between Bank of Ayudhya and Bangkok Bank Public, you can compare the effects of market volatilities on Bank of Ayudhya and Bangkok Bank 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 Bank of Ayudhya with a short position of Bangkok Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Ayudhya and Bangkok Bank.

Diversification Opportunities for Bank of Ayudhya and Bangkok Bank

0.81

Correlation Coefficient

Bank of Ayudhya  Bangkok Bank

Very poor diversification

The 3 months correlation between Bank and Bangkok is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Ayudhya and Bangkok Bank Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bangkok Bank Public and Bank of Ayudhya 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 Bank of Ayudhya are associated (or correlated) with Bangkok Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bangkok Bank Public has no effect on the direction of Bank of Ayudhya i.e., Bank of Ayudhya and Bangkok Bank go up and down completely randomly.

Pair Corralation between Bank of Ayudhya and Bangkok Bank

Assuming the 90 days trading horizon Bank of Ayudhya is expected to generate 27.66 times less return on investment than Bangkok Bank. But when comparing it to its historical volatility, Bank of Ayudhya is 1.11 times less risky than Bangkok Bank. It trades about 0.0 of its potential returns per unit of risk. Bangkok Bank Public is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  14,700  in Bangkok Bank Public on September 1, 2024 and sell it today you would earn a total of  250.00  from holding Bangkok Bank Public or generate 1.7% return on investment over 90 days.

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

Bank of Ayudhya  vs.  Bangkok Bank Public

Bank of Ayudhya

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Ayudhya are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Bank of Ayudhya is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Bangkok Bank Public

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bangkok Bank Public are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting essential indicators, Bangkok Bank may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Bank of Ayudhya and Bangkok Bank

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

The idea behind Bank of Ayudhya and Bangkok Bank Public 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.

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 Global Correlations module to find global opportunities by holding instruments from different markets.