Correlation Between Thai Life and Applied DB

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

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

Diversification Opportunities for Thai Life and Applied DB

0.41

Correlation Coefficient

Thai Life  Applied DB

Very weak diversification

The 3 months correlation between Thai and Applied is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Thai Life Insurance and Applied DB Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied DB Public and Thai Life 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 Thai Life Insurance are associated (or correlated) with Applied DB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied DB Public has no effect on the direction of Thai Life i.e., Thai Life and Applied DB go up and down completely randomly.

Pair Corralation between Thai Life and Applied DB

Assuming the 90 days trading horizon Thai Life Insurance is expected to generate 0.6 times more return on investment than Applied DB. However, Thai Life Insurance is 1.67 times less risky than Applied DB. It trades about 0.01 of its potential returns per unit of risk. Applied DB Public is currently generating about -0.04 per unit of risk. If you would invest  1,110  in Thai Life Insurance on October 15, 2024 and sell it today you would lose (10.00) from holding Thai Life Insurance or give up 0.9% of portfolio value over 90 days.

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

Thai Life Insurance  vs.  Applied DB Public

Thai Life Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

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

Applied DB Public

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Thai Life and Applied DB

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

The idea behind Thai Life Insurance and Applied DB 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.