Correlation Between BDO Unibank and Bangkok Bank

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

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

Diversification Opportunities for BDO Unibank and Bangkok Bank

0.67

Correlation Coefficient

BDO Unibank  Bangkok Bank

Poor diversification

The 3 months correlation between BDO and Bangkok is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding BDO Unibank ADR and Bangkok Bank Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bangkok Bank Public and BDO Unibank 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 BDO Unibank ADR are associated (or correlated) with Bangkok Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bangkok Bank Public has no effect on the direction of BDO Unibank i.e., BDO Unibank and Bangkok Bank go up and down completely randomly.

Pair Corralation between BDO Unibank and Bangkok Bank

Assuming the 90 days horizon BDO Unibank ADR is expected to generate 0.95 times more return on investment than Bangkok Bank. However, BDO Unibank ADR is 1.06 times less risky than Bangkok Bank. It trades about 0.36 of its potential returns per unit of risk. Bangkok Bank Public is currently generating about 0.22 per unit of risk. If you would invest  2,293  in BDO Unibank ADR on September 15, 2024 and sell it today you would earn a total of  349.00  from holding BDO Unibank ADR or generate 15.22% return on investment over 90 days.

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

BDO Unibank ADR  vs.  Bangkok Bank Public

BDO Unibank ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BDO Unibank ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, BDO Unibank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 nearly stable basic indicators, Bangkok Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BDO Unibank and Bangkok Bank

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

The idea behind BDO Unibank ADR and Bangkok Bank 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.