Correlation Between Krung Thai and Bangkok Chain

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

Diversification Opportunities for Krung Thai and Bangkok Chain

0.7

Correlation Coefficient

Krung Thai  Bangkok Chain

Poor diversification

The 3 months correlation between Krung and Bangkok is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Krung Thai Bank and Bangkok Chain Hospital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bangkok Chain Hospital 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 Bangkok Chain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bangkok Chain Hospital has no effect on the direction of Krung Thai i.e., Krung Thai and Bangkok Chain go up and down completely randomly.

Pair Corralation between Krung Thai and Bangkok Chain

Assuming the 90 days trading horizon Krung Thai Bank is expected to generate 0.62 times more return on investment than Bangkok Chain. However, Krung Thai Bank is 1.61 times less risky than Bangkok Chain. It trades about 0.13 of its potential returns per unit of risk. Bangkok Chain Hospital is currently generating about 0.06 per unit of risk. If you would invest  1,830  in Krung Thai Bank on September 2, 2024 and sell it today you would earn a total of  170.00  from holding Krung Thai Bank or generate 9.29% return on investment over 90 days.

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

Krung Thai Bank  vs.  Bangkok Chain Hospital

Krung Thai Bank

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Krung Thai Bank are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, Krung Thai may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bangkok Chain Hospital

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bangkok Chain Hospital are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting technical indicators, Bangkok Chain may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Krung Thai and Bangkok Chain

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

The idea behind Krung Thai Bank and Bangkok Chain Hospital 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.