Correlation Between Krung Thai and WHA Public

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

Diversification Opportunities for Krung Thai and WHA Public

0.45

Correlation Coefficient

Krung Thai  WHA Public

Very weak diversification

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

Pair Corralation between Krung Thai and WHA Public

Assuming the 90 days trading horizon Krung Thai is expected to generate 1.59 times less return on investment than WHA Public. But when comparing it to its historical volatility, Krung Thai Bank is 1.74 times less risky than WHA Public. It trades about 0.08 of its potential returns per unit of risk. WHA Public is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  543.00  in WHA Public on September 5, 2024 and sell it today you would earn a total of  42.00  from holding WHA Public or generate 7.73% 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.  WHA Public

Krung Thai Bank

Risk-Adjusted Performance

6 of 100

Modest

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.

WHA Public

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Krung Thai and WHA Public

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

The idea behind Krung Thai Bank and WHA 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.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.