Correlation Between Muang Thai and Krung Thai

Can any of the company-specific risk be diversified away by investing in both Muang Thai and Krung Thai 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 Muang Thai and Krung Thai into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Muang Thai Insurance and Krung Thai Bank, you can compare the effects of market volatilities on Muang Thai and Krung Thai 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 Muang Thai with a short position of Krung Thai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Muang Thai and Krung Thai.

Diversification Opportunities for Muang Thai and Krung Thai

0.45

Correlation Coefficient

Muang Thai  Krung Thai

Very weak diversification

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

Pair Corralation between Muang Thai and Krung Thai

Assuming the 90 days trading horizon Muang Thai is expected to generate 1.45 times less return on investment than Krung Thai. But when comparing it to its historical volatility, Muang Thai Insurance is 1.21 times less risky than Krung Thai. It trades about 0.13 of its potential returns per unit of risk. Krung Thai Bank is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,090  in Krung Thai Bank on December 22, 2024 and sell it today you would earn a total of  310.00  from holding Krung Thai Bank or generate 14.83% return on investment over 90 days.

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

Muang Thai Insurance  vs.  Krung Thai Bank

Muang Thai Insurance

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Muang Thai Insurance are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward indicators, Muang Thai may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Krung Thai sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Muang Thai and Krung Thai

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

The idea behind Muang Thai Insurance and Krung Thai Bank 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 Transaction History module to view history of all your transactions and understand their impact on performance.