Correlation Between Thai Life and Thai Union

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

Diversification Opportunities for Thai Life and Thai Union

-0.4

Correlation Coefficient

Thai Life  Thai Union

Very good diversification

The 3 months correlation between Thai and Thai is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Thai Life Insurance and Thai Union Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Union Group 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 Thai Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Union Group has no effect on the direction of Thai Life i.e., Thai Life and Thai Union go up and down completely randomly.

Pair Corralation between Thai Life and Thai Union

Assuming the 90 days trading horizon Thai Life Insurance is expected to generate 1.37 times more return on investment than Thai Union. However, Thai Life is 1.37 times more volatile than Thai Union Group. It trades about 0.07 of its potential returns per unit of risk. Thai Union Group is currently generating about -0.04 per unit of risk. If you would invest  1,090  in Thai Life Insurance on December 19, 2024 and sell it today you would earn a total of  100.00  from holding Thai Life Insurance or generate 9.17% return on investment over 90 days.

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

Thai Life Insurance  vs.  Thai Union Group

Thai Life Insurance

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Thai Life Insurance are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward indicators, Thai Life may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Thai Union Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Thai Union Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, Thai Union 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 Thai Life and Thai Union

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

The idea behind Thai Life Insurance and Thai Union Group 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.