Correlation Between Krung Thai and Thai Steel

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

Diversification Opportunities for Krung Thai and Thai Steel

-0.27

Correlation Coefficient

Krung Thai  Thai Steel

Very good diversification

The 3 months correlation between Krung and Thai is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Krung Thai Bank and Thai Steel Cable in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Steel Cable 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 Thai Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Steel Cable has no effect on the direction of Krung Thai i.e., Krung Thai and Thai Steel go up and down completely randomly.

Pair Corralation between Krung Thai and Thai Steel

Assuming the 90 days trading horizon Krung Thai is expected to generate 1.11 times less return on investment than Thai Steel. In addition to that, Krung Thai is 1.41 times more volatile than Thai Steel Cable. It trades about 0.08 of its total potential returns per unit of risk. Thai Steel Cable is currently generating about 0.12 per unit of volatility. If you would invest  1,420  in Thai Steel Cable on September 12, 2024 and sell it today you would earn a total of  80.00  from holding Thai Steel Cable or generate 5.63% return on investment over 90 days.

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

Krung Thai Bank  vs.  Thai Steel Cable

Krung Thai Bank

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Krung Thai Bank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Krung Thai is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Thai Steel Cable

Risk-Adjusted Performance

9 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Thai Steel Cable are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Thai Steel is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Krung Thai and Thai Steel

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

The idea behind Krung Thai Bank and Thai Steel Cable 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.