Correlation Between DBS Group and TMBThanachart Bank

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

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

Diversification Opportunities for DBS Group and TMBThanachart Bank

-0.67

Correlation Coefficient

DBS Group  TMBThanachart Bank

Excellent diversification

The 3 months correlation between DBS and TMBThanachart is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding DBS Group Holdings and TMBThanachart Bank Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TMBThanachart Bank Public and DBS Group 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 DBS Group Holdings are associated (or correlated) with TMBThanachart Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TMBThanachart Bank Public has no effect on the direction of DBS Group i.e., DBS Group and TMBThanachart Bank go up and down completely randomly.

Pair Corralation between DBS Group and TMBThanachart Bank

Assuming the 90 days trading horizon DBS Group Holdings is expected to generate 1.15 times more return on investment than TMBThanachart Bank. However, DBS Group is 1.15 times more volatile than TMBThanachart Bank Public. It trades about 0.19 of its potential returns per unit of risk. TMBThanachart Bank Public is currently generating about -0.07 per unit of risk. If you would invest  2,562  in DBS Group Holdings on September 12, 2024 and sell it today you would earn a total of  539.00  from holding DBS Group Holdings or generate 21.04% return on investment over 90 days.

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

DBS Group Holdings  vs.  TMBThanachart Bank Public

DBS Group Holdings

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DBS Group Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DBS Group reported solid returns over the last few months and may actually be approaching a breakup point.

TMBThanachart Bank Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TMBThanachart Bank Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, TMBThanachart Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with DBS Group and TMBThanachart Bank

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

The idea behind DBS Group Holdings and TMBThanachart Bank 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.