Correlation Between Krung Thai and VL Enterprise

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

Diversification Opportunities for Krung Thai and VL Enterprise

-0.36

Correlation Coefficient

Krung Thai  VL Enterprise

Very good diversification

The 3 months correlation between Krung and VL Enterprise is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Krung Thai Bank and VL Enterprise Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VL Enterprise Public 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 VL Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VL Enterprise Public has no effect on the direction of Krung Thai i.e., Krung Thai and VL Enterprise go up and down completely randomly.

Pair Corralation between Krung Thai and VL Enterprise

Assuming the 90 days trading horizon Krung Thai is expected to generate 5.03 times less return on investment than VL Enterprise. But when comparing it to its historical volatility, Krung Thai Bank is 4.72 times less risky than VL Enterprise. It trades about 0.07 of its potential returns per unit of risk. VL Enterprise Public is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  104.00  in VL Enterprise Public on September 15, 2024 and sell it today you would earn a total of  19.00  from holding VL Enterprise Public or generate 18.27% return on investment over 90 days.

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

Krung Thai Bank  vs.  VL Enterprise Public

Krung Thai Bank

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Krung Thai Bank are ranked lower than 5 (%) 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.

VL Enterprise Public

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in VL Enterprise Public are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, VL Enterprise disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Krung Thai and VL Enterprise

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

The idea behind Krung Thai Bank and VL Enterprise 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.