Correlation Between SCB X and Krungthai Card

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

By analyzing existing cross correlation between SCB X Public and Krungthai Card PCL, you can compare the effects of market volatilities on SCB X and Krungthai Card 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 SCB X with a short position of Krungthai Card. Check out your portfolio center. Please also check ongoing floating volatility patterns of SCB X and Krungthai Card.

Diversification Opportunities for SCB X and Krungthai Card

0.77

Correlation Coefficient

SCB X  Krungthai Card

Poor diversification

The 3 months correlation between SCB and Krungthai is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding SCB X Public and Krungthai Card PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Krungthai Card PCL and SCB X 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 SCB X Public are associated (or correlated) with Krungthai Card. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Krungthai Card PCL has no effect on the direction of SCB X i.e., SCB X and Krungthai Card go up and down completely randomly.

Pair Corralation between SCB X and Krungthai Card

Assuming the 90 days trading horizon SCB X Public is expected to generate 1.25 times more return on investment than Krungthai Card. However, SCB X is 1.25 times more volatile than Krungthai Card PCL. It trades about -0.09 of its potential returns per unit of risk. Krungthai Card PCL is currently generating about -0.11 per unit of risk. If you would invest  12,500  in SCB X Public on December 2, 2024 and sell it today you would lose (300.00) from holding SCB X Public or give up 2.4% of portfolio value over 90 days.

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

SCB X Public  vs.  Krungthai Card PCL

SCB X Public

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SCB X Public are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, SCB X is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Krungthai Card PCL

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Krungthai Card PCL are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Krungthai Card 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 SCB X and Krungthai Card

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

The idea behind SCB X Public and Krungthai Card PCL 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.