Correlation Between Banpu Public and Thai Oil

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

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

Diversification Opportunities for Banpu Public and Thai Oil

0.63

Correlation Coefficient

Banpu Public  Thai Oil

Poor diversification

The 3 months correlation between Banpu and Thai is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Banpu Public and Thai Oil Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Oil Public and Banpu Public 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 Banpu Public are associated (or correlated) with Thai Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Oil Public has no effect on the direction of Banpu Public i.e., Banpu Public and Thai Oil go up and down completely randomly.

Pair Corralation between Banpu Public and Thai Oil

Assuming the 90 days trading horizon Banpu Public is expected to under-perform the Thai Oil. In addition to that, Banpu Public is 1.25 times more volatile than Thai Oil Public. It trades about -0.06 of its total potential returns per unit of risk. Thai Oil Public is currently generating about -0.02 per unit of volatility. If you would invest  4,842  in Thai Oil Public on September 12, 2024 and sell it today you would lose (1,042) from holding Thai Oil Public or give up 21.52% of portfolio value over 90 days.

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

Banpu Public  vs.  Thai Oil Public

Banpu Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banpu Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Banpu Public is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Thai Oil Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thai Oil 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 basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Banpu Public and Thai Oil

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

The idea behind Banpu Public and Thai Oil 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.

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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.