Correlation Between Krung Thai and Siam Commercial

Can any of the company-specific risk be diversified away by investing in both Krung Thai and Siam Commercial 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 Siam Commercial 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 The Siam Commercial, you can compare the effects of market volatilities on Krung Thai and Siam Commercial 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 Siam Commercial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Krung Thai and Siam Commercial.

Diversification Opportunities for Krung Thai and Siam Commercial

0.84

Correlation Coefficient

Krung Thai  Siam Commercial

Very poor diversification

The 3 months correlation between Krung and Siam is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Krung Thai Bank and The Siam Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siam Commercial 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 Siam Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siam Commercial has no effect on the direction of Krung Thai i.e., Krung Thai and Siam Commercial go up and down completely randomly.

Pair Corralation between Krung Thai and Siam Commercial

Assuming the 90 days trading horizon Krung Thai Bank is expected to generate 1.5 times more return on investment than Siam Commercial. However, Krung Thai is 1.5 times more volatile than The Siam Commercial. It trades about 0.18 of its potential returns per unit of risk. The Siam Commercial is currently generating about 0.11 per unit of risk. If you would invest  2,100  in Krung Thai Bank on December 30, 2024 and sell it today you would earn a total of  350.00  from holding Krung Thai Bank or generate 16.67% return on investment over 90 days.

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

Krung Thai Bank  vs.  The Siam Commercial

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 14 (%) 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.

Siam Commercial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Siam Commercial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Siam Commercial may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Krung Thai and Siam Commercial

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

The idea behind Krung Thai Bank and The Siam Commercial 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.