Correlation Between Bank of Ayudhya and CIMB Thai

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

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

Diversification Opportunities for Bank of Ayudhya and CIMB Thai

0.23

Correlation Coefficient

Bank of Ayudhya  CIMB Thai

Modest diversification

The 3 months correlation between Bank and CIMB is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Ayudhya and CIMB Thai Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIMB Thai Bank and Bank of Ayudhya 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 Bank of Ayudhya are associated (or correlated) with CIMB Thai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIMB Thai Bank has no effect on the direction of Bank of Ayudhya i.e., Bank of Ayudhya and CIMB Thai go up and down completely randomly.

Pair Corralation between Bank of Ayudhya and CIMB Thai

Assuming the 90 days trading horizon Bank of Ayudhya is expected to generate 0.55 times more return on investment than CIMB Thai. However, Bank of Ayudhya is 1.81 times less risky than CIMB Thai. It trades about -0.16 of its potential returns per unit of risk. CIMB Thai Bank is currently generating about -0.2 per unit of risk. If you would invest  2,675  in Bank of Ayudhya on September 26, 2024 and sell it today you would lose (235.00) from holding Bank of Ayudhya or give up 8.79% of portfolio value over 90 days.

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

Bank of Ayudhya  vs.  CIMB Thai Bank

Bank of Ayudhya

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank of Ayudhya has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

CIMB Thai Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CIMB Thai Bank 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 fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Bank of Ayudhya and CIMB Thai

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

The idea behind Bank of Ayudhya and CIMB 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.