Correlation Between Thai Life and Mahachai Hospital

Can any of the company-specific risk be diversified away by investing in both Thai Life and Mahachai Hospital 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 Mahachai Hospital 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 Mahachai Hospital Public, you can compare the effects of market volatilities on Thai Life and Mahachai Hospital 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 Mahachai Hospital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thai Life and Mahachai Hospital.

Diversification Opportunities for Thai Life and Mahachai Hospital

0.16

Correlation Coefficient

Thai Life  Mahachai Hospital

Average diversification

The 3 months correlation between Thai and Mahachai is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Thai Life Insurance and Mahachai Hospital Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mahachai Hospital 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 Mahachai Hospital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mahachai Hospital Public has no effect on the direction of Thai Life i.e., Thai Life and Mahachai Hospital go up and down completely randomly.

Pair Corralation between Thai Life and Mahachai Hospital

Assuming the 90 days trading horizon Thai Life Insurance is expected to generate 1.45 times more return on investment than Mahachai Hospital. However, Thai Life is 1.45 times more volatile than Mahachai Hospital Public. It trades about -0.01 of its potential returns per unit of risk. Mahachai Hospital Public is currently generating about -0.47 per unit of risk. If you would invest  1,130  in Thai Life Insurance on October 4, 2024 and sell it today you would lose (10.00) from holding Thai Life Insurance or give up 0.88% of portfolio value over 90 days.

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

Thai Life Insurance  vs.  Mahachai Hospital Public

Thai Life Insurance

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Thai Life Insurance are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward indicators, Thai Life may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Mahachai Hospital Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mahachai Hospital Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Thai Life and Mahachai Hospital

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

The idea behind Thai Life Insurance and Mahachai Hospital 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.