Correlation Between Bangkok Dusit and Mahachai Hospital

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

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

Diversification Opportunities for Bangkok Dusit and Mahachai Hospital

0.85

Correlation Coefficient

Bangkok Dusit  Mahachai Hospital

Very poor diversification

The 3 months correlation between Bangkok and Mahachai is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Bangkok Dusit Medical and Mahachai Hospital Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mahachai Hospital Public and Bangkok Dusit 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 Bangkok Dusit Medical are associated (or correlated) with Mahachai Hospital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mahachai Hospital Public has no effect on the direction of Bangkok Dusit i.e., Bangkok Dusit and Mahachai Hospital go up and down completely randomly.

Pair Corralation between Bangkok Dusit and Mahachai Hospital

Assuming the 90 days trading horizon Bangkok Dusit Medical is expected to under-perform the Mahachai Hospital. But the stock apears to be less risky and, when comparing its historical volatility, Bangkok Dusit Medical is 1.17 times less risky than Mahachai Hospital. The stock trades about -0.21 of its potential returns per unit of risk. The Mahachai Hospital Public is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  3,300  in Mahachai Hospital Public on September 14, 2024 and sell it today you would lose (450.00) from holding Mahachai Hospital Public or give up 13.64% of portfolio value over 90 days.

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

Bangkok Dusit Medical  vs.  Mahachai Hospital Public

Bangkok Dusit Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bangkok Dusit Medical 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 forward-looking signals 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.

Mahachai Hospital Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mahachai Hospital 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 fundamental indicators 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 Bangkok Dusit and Mahachai Hospital

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

The idea behind Bangkok Dusit Medical and Mahachai Hospital 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.