Correlation Between CIMB Thai and Thaifoods Group

Can any of the company-specific risk be diversified away by investing in both CIMB Thai and Thaifoods Group 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 CIMB Thai and Thaifoods Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for CIMB Thai and Thaifoods Group

-0.1

Correlation Coefficient

CIMB Thai  Thaifoods Group

Good diversification

The 3 months correlation between CIMB and Thaifoods is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding CIMB Thai Bank and Thaifoods Group Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thaifoods Group Public and CIMB Thai 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 CIMB Thai Bank are associated (or correlated) with Thaifoods Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thaifoods Group Public has no effect on the direction of CIMB Thai i.e., CIMB Thai and Thaifoods Group go up and down completely randomly.

Pair Corralation between CIMB Thai and Thaifoods Group

Assuming the 90 days trading horizon CIMB Thai Bank is expected to generate 0.98 times more return on investment than Thaifoods Group. However, CIMB Thai Bank is 1.03 times less risky than Thaifoods Group. It trades about -0.18 of its potential returns per unit of risk. Thaifoods Group Public is currently generating about -0.21 per unit of risk. If you would invest  54.00  in CIMB Thai Bank on September 4, 2024 and sell it today you would lose (4.00) from holding CIMB Thai Bank or give up 7.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

CIMB Thai Bank  vs.  Thaifoods Group Public

CIMB Thai Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CIMB Thai Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, CIMB Thai is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Thaifoods Group Public

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Thaifoods Group Public are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental drivers, Thaifoods Group sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CIMB Thai and Thaifoods Group

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

The idea behind CIMB Thai Bank and Thaifoods Group 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.