Correlation Between Thai Oil and Krung Thai

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

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

Diversification Opportunities for Thai Oil and Krung Thai

0.1

Correlation Coefficient

Thai Oil  Krung Thai

Average diversification

The 3 months correlation between Thai and Krung is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Thai Oil Public and Krung Thai Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Krung Thai Bank and Thai Oil 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 Oil Public are associated (or correlated) with Krung Thai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Krung Thai Bank has no effect on the direction of Thai Oil i.e., Thai Oil and Krung Thai go up and down completely randomly.

Pair Corralation between Thai Oil and Krung Thai

Assuming the 90 days trading horizon Thai Oil Public is expected to generate 153.31 times more return on investment than Krung Thai. However, Thai Oil is 153.31 times more volatile than Krung Thai Bank. It trades about 0.16 of its potential returns per unit of risk. Krung Thai Bank is currently generating about 0.13 per unit of risk. If you would invest  4,625  in Thai Oil Public on August 31, 2024 and sell it today you would lose (900.00) from holding Thai Oil Public or give up 19.46% of portfolio value over 90 days.

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

Thai Oil Public  vs.  Krung Thai Bank

Thai Oil Public

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Thai Oil Public are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Thai Oil sustained solid returns over the last few months and may actually be approaching a breakup point.

Krung Thai Bank

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Krung Thai Bank are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Krung Thai may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Thai Oil and Krung Thai

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

The idea behind Thai Oil Public and Krung Thai Bank 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 Commodity Directory module to find actively traded commodities issued by global exchanges.