Correlation Between Thai Life and Betagro PCL

Can any of the company-specific risk be diversified away by investing in both Thai Life and Betagro PCL 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 Thai Life and Betagro PCL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Thai Life Insurance and Betagro PCL, you can compare the effects of market volatilities on Thai Life and Betagro PCL 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 Thai Life with a short position of Betagro PCL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thai Life and Betagro PCL.

Diversification Opportunities for Thai Life and Betagro PCL

-0.21

Correlation Coefficient

Thai Life  Betagro PCL

Very good diversification

The 3 months correlation between Thai and Betagro is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Thai Life Insurance and Betagro PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Betagro PCL and Thai Life 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 Thai Life Insurance are associated (or correlated) with Betagro PCL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Betagro PCL has no effect on the direction of Thai Life i.e., Thai Life and Betagro PCL go up and down completely randomly.

Pair Corralation between Thai Life and Betagro PCL

Assuming the 90 days trading horizon Thai Life Insurance is expected to under-perform the Betagro PCL. In addition to that, Thai Life is 2.25 times more volatile than Betagro PCL. It trades about -0.05 of its total potential returns per unit of risk. Betagro PCL is currently generating about -0.08 per unit of volatility. If you would invest  1,900  in Betagro PCL on September 25, 2024 and sell it today you would lose (30.00) from holding Betagro PCL or give up 1.58% of portfolio value over 90 days.

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

Thai Life Insurance  vs.  Betagro PCL

Thai Life Insurance

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Thai Life Insurance are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward indicators, Thai Life is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Betagro PCL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Betagro PCL 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 technical and fundamental 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 Thai Life and Betagro PCL

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

The idea behind Thai Life Insurance and Betagro PCL 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.