Correlation Between Bangkok Expressway and Thai Capital

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Can any of the company-specific risk be diversified away by investing in both Bangkok Expressway and Thai Capital 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 Expressway and Thai Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bangkok Expressway and and Thai Capital, you can compare the effects of market volatilities on Bangkok Expressway and Thai Capital 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 Expressway with a short position of Thai Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bangkok Expressway and Thai Capital.

Diversification Opportunities for Bangkok Expressway and Thai Capital

0.49
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Bangkok and Thai is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Bangkok Expressway and and Thai Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Capital and Bangkok Expressway 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 Expressway and are associated (or correlated) with Thai Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Capital has no effect on the direction of Bangkok Expressway i.e., Bangkok Expressway and Thai Capital go up and down completely randomly.

Pair Corralation between Bangkok Expressway and Thai Capital

Assuming the 90 days trading horizon Bangkok Expressway and is expected to under-perform the Thai Capital. But the stock apears to be less risky and, when comparing its historical volatility, Bangkok Expressway and is 4.41 times less risky than Thai Capital. The stock trades about -0.07 of its potential returns per unit of risk. The Thai Capital is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  44.00  in Thai Capital on September 5, 2024 and sell it today you would lose (3.00) from holding Thai Capital or give up 6.82% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Bangkok Expressway and  vs.  Thai Capital

 Performance 
       Timeline  
Bangkok Expressway and 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Bangkok Expressway and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent primary indicators, Bangkok Expressway is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.
Thai Capital 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Thai Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Thai Capital is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Bangkok Expressway and Thai Capital Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bangkok Expressway and Thai Capital

The main advantage of trading using opposite Bangkok Expressway and Thai Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bangkok Expressway position performs unexpectedly, Thai Capital 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 Capital will offset losses from the drop in Thai Capital's long position.
The idea behind Bangkok Expressway and and Thai Capital 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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