Correlation Between United Overseas and Bangkok Bank

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

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

Diversification Opportunities for United Overseas and Bangkok Bank

0.21

Correlation Coefficient

United Overseas  Bangkok Bank

Modest diversification

The 3 months correlation between United and Bangkok is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding United Overseas Bank and Bangkok Bank PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bangkok Bank PCL and United Overseas 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 United Overseas Bank are associated (or correlated) with Bangkok Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bangkok Bank PCL has no effect on the direction of United Overseas i.e., United Overseas and Bangkok Bank go up and down completely randomly.

Pair Corralation between United Overseas and Bangkok Bank

Assuming the 90 days horizon United Overseas is expected to generate 1.46 times less return on investment than Bangkok Bank. But when comparing it to its historical volatility, United Overseas Bank is 4.95 times less risky than Bangkok Bank. It trades about 0.11 of its potential returns per unit of risk. Bangkok Bank PCL is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,214  in Bangkok Bank PCL on December 30, 2024 and sell it today you would earn a total of  53.00  from holding Bangkok Bank PCL or generate 2.39% return on investment over 90 days.

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

United Overseas Bank  vs.  Bangkok Bank PCL

United Overseas Bank

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Overseas Bank are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, United Overseas may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Bangkok Bank PCL

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bangkok Bank PCL are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Bangkok Bank may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with United Overseas and Bangkok Bank

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

The idea behind United Overseas Bank and Bangkok Bank PCL 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..