Correlation Between CP ALL and Krung Thai

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

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

Diversification Opportunities for CP ALL and Krung Thai

0.72

Correlation Coefficient

CP ALL  Krung Thai

Poor diversification

The 3 months correlation between CPALL-R and Krung is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding CP ALL Public and Krung Thai Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Krung Thai Bank and CP ALL 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 CP ALL Public are associated (or correlated) with Krung Thai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Krung Thai Bank has no effect on the direction of CP ALL i.e., CP ALL and Krung Thai go up and down completely randomly.

Pair Corralation between CP ALL and Krung Thai

Assuming the 90 days trading horizon CP ALL is expected to generate 1.82 times less return on investment than Krung Thai. In addition to that, CP ALL is 1.15 times more volatile than Krung Thai Bank. It trades about 0.04 of its total potential returns per unit of risk. Krung Thai Bank is currently generating about 0.09 per unit of volatility. If you would invest  1,890  in Krung Thai Bank on September 4, 2024 and sell it today you would earn a total of  110.00  from holding Krung Thai Bank or generate 5.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

CP ALL Public  vs.  Krung Thai Bank

CP ALL Public

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CP ALL Public are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable essential indicators, CP ALL is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Krung Thai Bank

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Krung Thai Bank are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Krung Thai is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CP ALL and Krung Thai

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

The idea behind CP ALL Public and Krung 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.