Correlation Between Krung Thai and True Public

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

Diversification Opportunities for Krung Thai and True Public

0.45

Correlation Coefficient

Krung Thai  True Public

Very weak diversification

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

Pair Corralation between Krung Thai and True Public

Assuming the 90 days trading horizon Krung Thai Bank is expected to generate 0.6 times more return on investment than True Public. However, Krung Thai Bank is 1.66 times less risky than True Public. It trades about 0.18 of its potential returns per unit of risk. True Public is currently generating about 0.06 per unit of risk. If you would invest  2,100  in Krung Thai Bank on December 29, 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	Weak
Accuracy	100.0%
Values	Daily Returns

Krung Thai Bank  vs.  True Public

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 quite conflicting fundamental drivers, Krung Thai disclosed solid returns over the last few months and may actually be approaching a breakup point.

True Public

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in True Public are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, True Public may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Krung Thai and True Public

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

The idea behind Krung Thai Bank and True 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.