Correlation Between Krung Thai and Muang Thai

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

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

Diversification Opportunities for Krung Thai and Muang Thai

0.45

Correlation Coefficient

Krung Thai  Muang Thai

Very weak diversification

The 3 months correlation between Krung and Muang is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Krung Thai Bank and Muang Thai Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Muang Thai Insurance and Krung 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 Krung Thai Bank are associated (or correlated) with Muang Thai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Muang Thai Insurance has no effect on the direction of Krung Thai i.e., Krung Thai and Muang Thai go up and down completely randomly.

Pair Corralation between Krung Thai and Muang Thai

Assuming the 90 days trading horizon Krung Thai Bank is expected to generate 1.21 times more return on investment than Muang Thai. However, Krung Thai is 1.21 times more volatile than Muang Thai Insurance. It trades about 0.16 of its potential returns per unit of risk. Muang Thai Insurance is currently generating about 0.13 per unit of risk. If you would invest  2,090  in Krung Thai Bank on December 22, 2024 and sell it today you would earn a total of  310.00  from holding Krung Thai Bank or generate 14.83% return on investment over 90 days.

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

Krung Thai Bank  vs.  Muang Thai Insurance

Krung Thai Bank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Krung Thai Bank are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Krung Thai sustained solid returns over the last few months and may actually be approaching a breakup point.

Muang Thai Insurance

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Muang Thai Insurance are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward indicators, Muang Thai may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Krung Thai and Muang Thai

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

The idea behind Krung Thai Bank and Muang Thai 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.