Correlation Between Bangkok Bank and Eastern Commercial

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

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

Diversification Opportunities for Bangkok Bank and Eastern Commercial

0.07

Correlation Coefficient

Bangkok Bank  Eastern Commercial

Significant diversification

The 3 months correlation between Bangkok and Eastern is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Bangkok Bank Public and Eastern Commercial Leasing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern Commercial and Bangkok Bank 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 Bangkok Bank Public are associated (or correlated) with Eastern Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern Commercial has no effect on the direction of Bangkok Bank i.e., Bangkok Bank and Eastern Commercial go up and down completely randomly.

Pair Corralation between Bangkok Bank and Eastern Commercial

Assuming the 90 days trading horizon Bangkok Bank Public is expected to generate 0.2 times more return on investment than Eastern Commercial. However, Bangkok Bank Public is 5.08 times less risky than Eastern Commercial. It trades about 0.03 of its potential returns per unit of risk. Eastern Commercial Leasing is currently generating about -0.26 per unit of risk. If you would invest  15,150  in Bangkok Bank Public on October 5, 2024 and sell it today you would earn a total of  50.00  from holding Bangkok Bank Public or generate 0.33% return on investment over 90 days.

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

Bangkok Bank Public  vs.  Eastern Commercial Leasing

Bangkok Bank Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bangkok Bank Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Bangkok Bank is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Eastern Commercial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eastern Commercial Leasing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Eastern Commercial is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Bangkok Bank and Eastern Commercial

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

The idea behind Bangkok Bank Public and Eastern Commercial Leasing 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.