Correlation Between Bank of the Philippine Is and Bangkok Bank

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

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

Diversification Opportunities for Bank of the Philippine Is and Bangkok Bank

0.46

Correlation Coefficient

Bank of the Philippine Is  Bangkok Bank

Very weak diversification

The 3 months correlation between Bank and Bangkok is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Bank of the 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 Bank of the Philippine Is 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 the 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 Bank of the Philippine Is i.e., Bank of the Philippine Is and Bangkok Bank go up and down completely randomly.

Pair Corralation between Bank of the Philippine Is and Bangkok Bank

Assuming the 90 days horizon Bank of the is expected to under-perform the Bangkok Bank. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bank of the is 1.54 times less risky than Bangkok Bank. The pink sheet trades about -0.22 of its potential returns per unit of risk. The Bangkok Bank PCL is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,158  in Bangkok Bank PCL on September 5, 2024 and sell it today you would earn a total of  122.00  from holding Bangkok Bank PCL or generate 5.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Bank of the  vs.  Bangkok Bank PCL

Bank of the Philippine Is

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank of the has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Bank of the Philippine Is is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Bangkok Bank PCL

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bangkok Bank PCL are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Bangkok Bank showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of the Philippine Is and Bangkok Bank

The main advantage of trading using opposite Bank of the Philippine Is and Bangkok Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of the Philippine Is 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 Bank of the 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.