Correlation Between CIMB Thai and Central Retail

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

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

Diversification Opportunities for CIMB Thai and Central Retail

-0.39

Correlation Coefficient

CIMB Thai  Central Retail

Very good diversification

The 3 months correlation between CIMB and Central is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding CIMB Thai Bank and Central Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Retail and CIMB Thai 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 CIMB Thai Bank are associated (or correlated) with Central Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Retail has no effect on the direction of CIMB Thai i.e., CIMB Thai and Central Retail go up and down completely randomly.

Pair Corralation between CIMB Thai and Central Retail

Assuming the 90 days trading horizon CIMB Thai Bank is expected to under-perform the Central Retail. But the stock apears to be less risky and, when comparing its historical volatility, CIMB Thai Bank is 1.24 times less risky than Central Retail. The stock trades about -0.1 of its potential returns per unit of risk. The Central Retail is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,175  in Central Retail on September 12, 2024 and sell it today you would earn a total of  225.00  from holding Central Retail or generate 7.09% return on investment over 90 days.

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

CIMB Thai Bank  vs.  Central Retail

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 latest conflicting performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Central Retail

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Central Retail are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, Central Retail may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CIMB Thai and Central Retail

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

The idea behind CIMB Thai Bank and Central Retail 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 Transaction History module to view history of all your transactions and understand their impact on performance.