Correlation Between Krungthai Card and Carabao Group

Can any of the company-specific risk be diversified away by investing in both Krungthai Card and Carabao Group 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 Krungthai Card and Carabao Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Krungthai Card PCL and Carabao Group Public, you can compare the effects of market volatilities on Krungthai Card and Carabao Group 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 Krungthai Card with a short position of Carabao Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Krungthai Card and Carabao Group.

Diversification Opportunities for Krungthai Card and Carabao Group

0.71

Correlation Coefficient

Krungthai Card  Carabao Group

Poor diversification

The 3 months correlation between Krungthai and Carabao is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Krungthai Card PCL and Carabao Group Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carabao Group Public and Krungthai Card 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 Krungthai Card PCL are associated (or correlated) with Carabao Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carabao Group Public has no effect on the direction of Krungthai Card i.e., Krungthai Card and Carabao Group go up and down completely randomly.

Pair Corralation between Krungthai Card and Carabao Group

Assuming the 90 days trading horizon Krungthai Card is expected to generate 1.34 times less return on investment than Carabao Group. But when comparing it to its historical volatility, Krungthai Card PCL is 1.41 times less risky than Carabao Group. It trades about 0.02 of its potential returns per unit of risk. Carabao Group Public is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  7,591  in Carabao Group Public on September 12, 2024 and sell it today you would earn a total of  534.00  from holding Carabao Group Public or generate 7.03% return on investment over 90 days.

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

Krungthai Card PCL  vs.  Carabao Group Public

Krungthai Card PCL

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Krungthai Card PCL are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Krungthai Card is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Carabao Group Public

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Carabao Group Public are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting technical and fundamental indicators, Carabao Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Krungthai Card and Carabao Group

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

The idea behind Krungthai Card PCL and Carabao Group 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.