Correlation Between Bank of Ayudhya and Central Retail

Can any of the company-specific risk be diversified away by investing in both Bank of Ayudhya and Central Retail 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 Central Retail 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 Central Retail, you can compare the effects of market volatilities on Bank of Ayudhya and Central Retail 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 Central Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Ayudhya and Central Retail.

Diversification Opportunities for Bank of Ayudhya and Central Retail

0.27

Correlation Coefficient

Bank of Ayudhya  Central Retail

Modest diversification

The 3 months correlation between Bank and Central is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Ayudhya and Central Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Retail 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 Central Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Retail has no effect on the direction of Bank of Ayudhya i.e., Bank of Ayudhya and Central Retail go up and down completely randomly.

Pair Corralation between Bank of Ayudhya and Central Retail

Assuming the 90 days trading horizon Bank of Ayudhya is expected to generate 4.86 times less return on investment than Central Retail. But when comparing it to its historical volatility, Bank of Ayudhya is 1.43 times less risky than Central Retail. It trades about 0.03 of its potential returns per unit of risk. Central Retail is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,950  in Central Retail on September 4, 2024 and sell it today you would earn a total of  475.00  from holding Central Retail or generate 16.1% return on investment over 90 days.

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

Bank of Ayudhya  vs.  Central Retail

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.

Central Retail

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Central Retail are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, Central Retail disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of Ayudhya and Central Retail

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

The idea behind Bank of Ayudhya and Central Retail 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.