Correlation Between Bangkok Dusit and Mega Lifesciences

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

Diversification Opportunities for Bangkok Dusit and Mega Lifesciences

0.69

Correlation Coefficient

Bangkok Dusit  Mega Lifesciences

Poor diversification

The 3 months correlation between Bangkok and Mega is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Bangkok Dusit Medical and Mega Lifesciences Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mega Lifesciences Public 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 Mega Lifesciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mega Lifesciences Public has no effect on the direction of Bangkok Dusit i.e., Bangkok Dusit and Mega Lifesciences go up and down completely randomly.

Pair Corralation between Bangkok Dusit and Mega Lifesciences

Assuming the 90 days trading horizon Bangkok Dusit Medical is expected to under-perform the Mega Lifesciences. But the stock apears to be less risky and, when comparing its historical volatility, Bangkok Dusit Medical is 1.29 times less risky than Mega Lifesciences. The stock trades about -0.08 of its potential returns per unit of risk. The Mega Lifesciences Public is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  3,275  in Mega Lifesciences Public on December 30, 2024 and sell it today you would lose (225.00) from holding Mega Lifesciences Public or give up 6.87% of portfolio value over 90 days.

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

Bangkok Dusit Medical  vs.  Mega Lifesciences Public

Bangkok Dusit Medical

Risk-Adjusted Performance

Very Weak

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

Mega Lifesciences Public

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Bangkok Dusit and Mega Lifesciences

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

The idea behind Bangkok Dusit Medical and Mega Lifesciences 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.