Correlation Between Bangkok Dusit and Thai Life

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

Diversification Opportunities for Bangkok Dusit and Thai Life

0.01

Correlation Coefficient

Bangkok Dusit  Thai Life

Significant diversification

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

Pair Corralation between Bangkok Dusit and Thai Life

Assuming the 90 days trading horizon Bangkok Dusit Medical is expected to under-perform the Thai Life. But the stock apears to be less risky and, when comparing its historical volatility, Bangkok Dusit Medical is 1.47 times less risky than Thai Life. The stock trades about -0.22 of its potential returns per unit of risk. The Thai Life Insurance is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,130  in Thai Life Insurance on October 4, 2024 and sell it today you would lose (10.00) from holding Thai Life Insurance or give up 0.88% of portfolio value over 90 days.

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

Bangkok Dusit Medical  vs.  Thai Life Insurance

Bangkok Dusit Medical

Risk-Adjusted Performance

0 of 100

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 conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Thai Life Insurance

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Thai Life Insurance are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward indicators, Thai Life may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Bangkok Dusit and Thai Life

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

The idea behind Bangkok Dusit Medical and Thai Life Insurance 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.