Correlation Between Bangkok Bank and Royal Orchid

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

By analyzing existing cross correlation between Bangkok Bank PCL and Royal Orchid Hotel, you can compare the effects of market volatilities on Bangkok Bank and Royal Orchid 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 Royal Orchid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bangkok Bank and Royal Orchid.

Diversification Opportunities for Bangkok Bank and Royal Orchid

0.01

Correlation Coefficient

Bangkok Bank  Royal Orchid

Significant diversification

The 3 months correlation between Bangkok and Royal is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Bangkok Bank PCL and Royal Orchid Hotel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Orchid Hotel 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 PCL are associated (or correlated) with Royal Orchid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Orchid Hotel has no effect on the direction of Bangkok Bank i.e., Bangkok Bank and Royal Orchid go up and down completely randomly.

Pair Corralation between Bangkok Bank and Royal Orchid

Assuming the 90 days trading horizon Bangkok Bank PCL is expected to generate 0.48 times more return on investment than Royal Orchid. However, Bangkok Bank PCL is 2.07 times less risky than Royal Orchid. It trades about 0.01 of its potential returns per unit of risk. Royal Orchid Hotel is currently generating about -0.05 per unit of risk. If you would invest  15,050  in Bangkok Bank PCL on December 23, 2024 and sell it today you would earn a total of  50.00  from holding Bangkok Bank PCL 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 PCL  vs.  Royal Orchid Hotel

Bangkok Bank PCL

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bangkok Bank PCL 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.

Royal Orchid Hotel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Royal Orchid Hotel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's technical indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Bangkok Bank and Royal Orchid

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

The idea behind Bangkok Bank PCL and Royal Orchid Hotel 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.