Correlation Between ThaiDex SET50 and BCAP MSCI

Can any of the company-specific risk be diversified away by investing in both ThaiDex SET50 and BCAP MSCI 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 ThaiDex SET50 and BCAP MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ThaiDex SET50 Exchange and BCAP MSCI Thailand, you can compare the effects of market volatilities on ThaiDex SET50 and BCAP MSCI 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 ThaiDex SET50 with a short position of BCAP MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of ThaiDex SET50 and BCAP MSCI.

Diversification Opportunities for ThaiDex SET50 and BCAP MSCI

0.77

Correlation Coefficient

ThaiDex SET50  BCAP MSCI

Poor diversification

The 3 months correlation between ThaiDex and BCAP is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding ThaiDex SET50 Exchange and BCAP MSCI Thailand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCAP MSCI Thailand and ThaiDex SET50 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 ThaiDex SET50 Exchange are associated (or correlated) with BCAP MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCAP MSCI Thailand has no effect on the direction of ThaiDex SET50 i.e., ThaiDex SET50 and BCAP MSCI go up and down completely randomly.

Pair Corralation between ThaiDex SET50 and BCAP MSCI

Assuming the 90 days trading horizon ThaiDex SET50 Exchange is expected to generate 0.83 times more return on investment than BCAP MSCI. However, ThaiDex SET50 Exchange is 1.21 times less risky than BCAP MSCI. It trades about -0.11 of its potential returns per unit of risk. BCAP MSCI Thailand is currently generating about -0.15 per unit of risk. If you would invest  911.00  in ThaiDex SET50 Exchange on October 1, 2024 and sell it today you would lose (16.00) from holding ThaiDex SET50 Exchange or give up 1.76% of portfolio value over 90 days.

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

ThaiDex SET50 Exchange  vs.  BCAP MSCI Thailand

ThaiDex SET50 Exchange

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ThaiDex SET50 Exchange has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, ThaiDex SET50 is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

BCAP MSCI Thailand

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BCAP MSCI Thailand has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, BCAP MSCI is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with ThaiDex SET50 and BCAP MSCI

The main advantage of trading using opposite ThaiDex SET50 and BCAP MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ThaiDex SET50 position performs unexpectedly, BCAP MSCI 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 BCAP MSCI will offset losses from the drop in BCAP MSCI's long position.

The idea behind ThaiDex SET50 Exchange and BCAP MSCI Thailand 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.