Correlation Between Krung Thai and Premier Products

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

Diversification Opportunities for Krung Thai and Premier Products

0.03

Correlation Coefficient

Krung Thai  Premier Products

Significant diversification

The 3 months correlation between Krung and Premier is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Krung Thai Bank and Premier Products Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier Products 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 Premier Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Products Public has no effect on the direction of Krung Thai i.e., Krung Thai and Premier Products go up and down completely randomly.

Pair Corralation between Krung Thai and Premier Products

Assuming the 90 days trading horizon Krung Thai is expected to generate 31.26 times less return on investment than Premier Products. But when comparing it to its historical volatility, Krung Thai Bank is 35.2 times less risky than Premier Products. It trades about 0.04 of its potential returns per unit of risk. Premier Products Public is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  212.00  in Premier Products Public on September 28, 2024 and sell it today you would lose (70.00) from holding Premier Products Public or give up 33.02% of portfolio value over 90 days.

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

Krung Thai Bank  vs.  Premier Products Public

Krung Thai Bank

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Krung Thai Bank are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Krung Thai is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Premier Products Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Premier Products Public 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 basic indicators 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 Krung Thai and Premier Products

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

The idea behind Krung Thai Bank and Premier Products 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.

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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.