Correlation Between Krung Thai and Siam Cement
Can any of the company-specific risk be diversified away by investing in both Krung Thai and Siam Cement 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 Krung Thai and Siam Cement into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Krung Thai Bank and The Siam Cement, you can compare the effects of market volatilities on Krung Thai and Siam Cement 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 Krung Thai with a short position of Siam Cement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Krung Thai and Siam Cement.
Diversification Opportunities for Krung Thai and Siam Cement
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Krung and Siam is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Krung Thai Bank and The Siam Cement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Siam Cement and Krung 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 Krung Thai Bank are associated (or correlated) with Siam Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Siam Cement has no effect on the direction of Krung Thai i.e., Krung Thai and Siam Cement go up and down completely randomly.
Pair Corralation between Krung Thai and Siam Cement
Assuming the 90 days trading horizon Krung Thai Bank is expected to generate 0.91 times more return on investment than Siam Cement. However, Krung Thai Bank is 1.1 times less risky than Siam Cement. It trades about 0.03 of its potential returns per unit of risk. The Siam Cement is currently generating about -0.11 per unit of risk. If you would invest 1,890 in Krung Thai Bank on September 26, 2024 and sell it today you would earn a total of 200.00 from holding Krung Thai Bank or generate 10.58% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Krung Thai Bank vs. The Siam Cement
Performance |
Timeline |
Krung Thai Bank |
Siam Cement |
Krung Thai and Siam Cement Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Krung Thai and Siam Cement
The main advantage of trading using opposite Krung Thai and Siam Cement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Krung Thai position performs unexpectedly, Siam Cement 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 Siam Cement will offset losses from the drop in Siam Cement's long position.Krung Thai vs. The Siam Commercial | Krung Thai vs. Thai Oil Public | Krung Thai vs. Thai Union Group | Krung Thai vs. Kasikornbank Public |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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