Correlation Between Home Product and Bangkok Dusit

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

By analyzing existing cross correlation between Home Product Center and Bangkok Dusit Medical, you can compare the effects of market volatilities on Home Product and Bangkok Dusit 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 Home Product with a short position of Bangkok Dusit. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Product and Bangkok Dusit.

Diversification Opportunities for Home Product and Bangkok Dusit

0.83

Correlation Coefficient

Home Product  Bangkok Dusit

Very poor diversification

The 3 months correlation between Home and Bangkok is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Home Product Center and Bangkok Dusit Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bangkok Dusit Medical and Home Product 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 Home Product Center are associated (or correlated) with Bangkok Dusit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bangkok Dusit Medical has no effect on the direction of Home Product i.e., Home Product and Bangkok Dusit go up and down completely randomly.

Pair Corralation between Home Product and Bangkok Dusit

Assuming the 90 days trading horizon Home Product Center is expected to under-perform the Bangkok Dusit. In addition to that, Home Product is 1.29 times more volatile than Bangkok Dusit Medical. It trades about -0.04 of its total potential returns per unit of risk. Bangkok Dusit Medical is currently generating about -0.01 per unit of volatility. If you would invest  2,697  in Bangkok Dusit Medical on September 12, 2024 and sell it today you would lose (172.00) from holding Bangkok Dusit Medical or give up 6.38% of portfolio value over 90 days.

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

Home Product Center  vs.  Bangkok Dusit Medical

Home Product Center

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Home Product Center 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.

Bangkok Dusit Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bangkok Dusit Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Home Product and Bangkok Dusit

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

The idea behind Home Product Center and Bangkok Dusit Medical 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.