Correlation Between Royal Orchid and Bangkok Bank

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

By analyzing existing cross correlation between Royal Orchid Hotel and Bangkok Bank Public, you can compare the effects of market volatilities on Royal Orchid and Bangkok Bank 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 Royal Orchid with a short position of Bangkok Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Orchid and Bangkok Bank.

Diversification Opportunities for Royal Orchid and Bangkok Bank

0.35

Correlation Coefficient

Royal Orchid  Bangkok Bank

Weak diversification

The 3 months correlation between Royal and Bangkok is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Royal Orchid Hotel and Bangkok Bank Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bangkok Bank Public and Royal Orchid 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 Royal Orchid Hotel are associated (or correlated) with Bangkok Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bangkok Bank Public has no effect on the direction of Royal Orchid i.e., Royal Orchid and Bangkok Bank go up and down completely randomly.

Pair Corralation between Royal Orchid and Bangkok Bank

Assuming the 90 days trading horizon Royal Orchid Hotel is expected to under-perform the Bangkok Bank. In addition to that, Royal Orchid is 4.27 times more volatile than Bangkok Bank Public. It trades about -0.01 of its total potential returns per unit of risk. Bangkok Bank Public is currently generating about 0.14 per unit of volatility. If you would invest  14,650  in Bangkok Bank Public on October 7, 2024 and sell it today you would earn a total of  600.00  from holding Bangkok Bank Public or generate 4.1% return on investment over 90 days.

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

Royal Orchid Hotel  vs.  Bangkok Bank Public

Royal Orchid Hotel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Royal Orchid Hotel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's technical indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Bangkok Bank Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bangkok Bank Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Bangkok Bank 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 Royal Orchid and Bangkok Bank

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

The idea behind Royal Orchid Hotel and Bangkok Bank 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.