Correlation Between Bangkok Dusit and Central Plaza

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

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

Diversification Opportunities for Bangkok Dusit and Central Plaza

0.93

Correlation Coefficient

Bangkok Dusit  Central Plaza

Almost no diversification

The 3 months correlation between Bangkok and Central is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Bangkok Dusit Medical and Central Plaza Hotel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Plaza Hotel and Bangkok Dusit 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 Dusit Medical are associated (or correlated) with Central Plaza. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Plaza Hotel has no effect on the direction of Bangkok Dusit i.e., Bangkok Dusit and Central Plaza go up and down completely randomly.

Pair Corralation between Bangkok Dusit and Central Plaza

Assuming the 90 days trading horizon Bangkok Dusit is expected to generate 1.01 times less return on investment than Central Plaza. In addition to that, Bangkok Dusit is 1.0 times more volatile than Central Plaza Hotel. It trades about 0.17 of its total potential returns per unit of risk. Central Plaza Hotel is currently generating about 0.17 per unit of volatility. If you would invest  0.00  in Central Plaza Hotel on September 3, 2024 and sell it today you would earn a total of  3,775  from holding Central Plaza Hotel or generate 9.223372036854776E16% return on investment over 90 days.

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

Bangkok Dusit Medical  vs.  Central Plaza Hotel

Bangkok Dusit Medical

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bangkok Dusit Medical are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting primary indicators, Bangkok Dusit sustained solid returns over the last few months and may actually be approaching a breakup point.

Central Plaza Hotel

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Central Plaza Hotel are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Central Plaza sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bangkok Dusit and Central Plaza

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

The idea behind Bangkok Dusit Medical and Central Plaza 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.