Correlation Between Krung Thai and TISCO Financial

Can any of the company-specific risk be diversified away by investing in both Krung Thai and TISCO Financial 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 TISCO Financial 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 TISCO Financial Group, you can compare the effects of market volatilities on Krung Thai and TISCO Financial 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 TISCO Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Krung Thai and TISCO Financial.

Diversification Opportunities for Krung Thai and TISCO Financial

0.49

Correlation Coefficient

Krung Thai  TISCO Financial

Very weak diversification

The 3 months correlation between Krung and TISCO is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Krung Thai Bank and TISCO Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TISCO Financial Group 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 TISCO Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TISCO Financial Group has no effect on the direction of Krung Thai i.e., Krung Thai and TISCO Financial go up and down completely randomly.

Pair Corralation between Krung Thai and TISCO Financial

Assuming the 90 days trading horizon Krung Thai Bank is expected to generate 2.78 times more return on investment than TISCO Financial. However, Krung Thai is 2.78 times more volatile than TISCO Financial Group. It trades about 0.06 of its potential returns per unit of risk. TISCO Financial Group is currently generating about 0.01 per unit of risk. If you would invest  2,050  in Krung Thai Bank on September 17, 2024 and sell it today you would earn a total of  80.00  from holding Krung Thai Bank or generate 3.9% return on investment over 90 days.

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

Krung Thai Bank  vs.  TISCO Financial Group

Krung Thai Bank

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Krung Thai Bank are ranked lower than 4 (%) 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.

TISCO Financial Group

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days TISCO Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, TISCO Financial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Krung Thai and TISCO Financial

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

The idea behind Krung Thai Bank and TISCO Financial Group 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .