Correlation Between Krung Thai and DOHOME

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

Diversification Opportunities for Krung Thai and DOHOME

-0.29

Correlation Coefficient

Krung Thai  DOHOME

Very good diversification

The 3 months correlation between Krung and DOHOME is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Krung Thai Bank and DOHOME in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DOHOME 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 DOHOME. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOHOME has no effect on the direction of Krung Thai i.e., Krung Thai and DOHOME go up and down completely randomly.

Pair Corralation between Krung Thai and DOHOME

Assuming the 90 days trading horizon Krung Thai Bank is expected to generate 0.54 times more return on investment than DOHOME. However, Krung Thai Bank is 1.84 times less risky than DOHOME. It trades about 0.13 of its potential returns per unit of risk. DOHOME is currently generating about -0.04 per unit of risk. If you would invest  1,830  in Krung Thai Bank on September 1, 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 Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Krung Thai Bank  vs.  DOHOME

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 December 2024.

DOHOME

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Krung Thai and DOHOME

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

The idea behind Krung Thai Bank and DOHOME 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.