Correlation Between Thai Steel and Krung Thai

Can any of the company-specific risk be diversified away by investing in both Thai Steel 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 Steel 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 Steel Cable and Krung Thai Bank, you can compare the effects of market volatilities on Thai Steel 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 Steel with a short position of Krung Thai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thai Steel and Krung Thai.

Diversification Opportunities for Thai Steel and Krung Thai

0.29

Correlation Coefficient

Thai Steel  Krung Thai

Modest diversification

The 3 months correlation between Thai and Krung is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Thai Steel Cable 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 Steel 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 Steel Cable 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 Steel i.e., Thai Steel and Krung Thai go up and down completely randomly.

Pair Corralation between Thai Steel and Krung Thai

Assuming the 90 days trading horizon Thai Steel Cable is expected to generate 109.81 times more return on investment than Krung Thai. However, Thai Steel is 109.81 times more volatile than Krung Thai Bank. It trades about 0.13 of its potential returns per unit of risk. Krung Thai Bank is currently generating about 0.11 per unit of risk. If you would invest  0.00  in Thai Steel Cable on September 3, 2024 and sell it today you would earn a total of  1,480  from holding Thai Steel Cable or generate 9.223372036854776E16% return on investment over 90 days.

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

Thai Steel Cable  vs.  Krung Thai Bank

Thai Steel Cable

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Thai Steel Cable are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, Thai Steel disclosed solid returns over the last few months and may actually be approaching a breakup point.

Krung Thai Bank

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Krung Thai Bank are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, Krung Thai may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Thai Steel and Krung Thai

The main advantage of trading using opposite Thai Steel and Krung Thai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thai Steel 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 Steel Cable 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.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.