Correlation Between China Citic and Bangkok Bank

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

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

Diversification Opportunities for China Citic and Bangkok Bank

0.35

Correlation Coefficient

China Citic  Bangkok Bank

Weak diversification

The 3 months correlation between China and Bangkok is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding China Citic Bank and Bangkok Bank PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bangkok Bank PCL and China Citic 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 China Citic Bank 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 PCL has no effect on the direction of China Citic i.e., China Citic and Bangkok Bank go up and down completely randomly.

Pair Corralation between China Citic and Bangkok Bank

Assuming the 90 days horizon China Citic Bank is expected to under-perform the Bangkok Bank. In addition to that, China Citic is 1.03 times more volatile than Bangkok Bank PCL. It trades about 0.0 of its total potential returns per unit of risk. Bangkok Bank PCL is currently generating about 0.06 per unit of volatility. If you would invest  2,030  in Bangkok Bank PCL on August 31, 2024 and sell it today you would earn a total of  235.00  from holding Bangkok Bank PCL or generate 11.58% return on investment over 90 days.

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

China Citic Bank  vs.  Bangkok Bank PCL

China Citic Bank

Risk-Adjusted Performance

0 of 100

Very Weak

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

Bangkok Bank PCL

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bangkok Bank PCL are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Bangkok Bank showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Citic and Bangkok Bank

The main advantage of trading using opposite China Citic and Bangkok Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Citic 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 China Citic Bank and Bangkok Bank PCL 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.