Correlation Between Bangkok Life and Thai Life

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

Diversification Opportunities for Bangkok Life and Thai Life

0.34

Correlation Coefficient

Bangkok Life  Thai Life

Weak diversification

The 3 months correlation between Bangkok and Thai is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Bangkok Life Assurance 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 Life 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 Life Assurance 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 Life i.e., Bangkok Life and Thai Life go up and down completely randomly.

Pair Corralation between Bangkok Life and Thai Life

Assuming the 90 days trading horizon Bangkok Life Assurance is expected to under-perform the Thai Life. But the stock apears to be less risky and, when comparing its historical volatility, Bangkok Life Assurance is 1.18 times less risky than Thai Life. The stock trades about -0.07 of its potential returns per unit of risk. The Thai Life Insurance is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,120  in Thai Life Insurance on December 29, 2024 and sell it today you would earn a total of  40.00  from holding Thai Life Insurance or generate 3.57% return on investment over 90 days.

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

Bangkok Life Assurance  vs.  Thai Life Insurance

Bangkok Life Assurance

Risk-Adjusted Performance

Very Weak

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

Thai Life Insurance

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Thai Life Insurance are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward indicators, Thai Life 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 Life and Thai Life

The main advantage of trading using opposite Bangkok Life and Thai Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bangkok Life 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 Life Assurance 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.

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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.