Correlation Between Thai Oil and TMBThanachart Bank

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

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

Diversification Opportunities for Thai Oil and TMBThanachart Bank

0.83

Correlation Coefficient

Thai Oil  TMBThanachart Bank

Very poor diversification

The 3 months correlation between Thai and TMBThanachart is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Thai Oil Public and TMBThanachart Bank Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TMBThanachart Bank Public and Thai Oil 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 Oil Public are associated (or correlated) with TMBThanachart Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TMBThanachart Bank Public has no effect on the direction of Thai Oil i.e., Thai Oil and TMBThanachart Bank go up and down completely randomly.

Pair Corralation between Thai Oil and TMBThanachart Bank

Assuming the 90 days trading horizon Thai Oil Public is expected to under-perform the TMBThanachart Bank. In addition to that, Thai Oil is 2.03 times more volatile than TMBThanachart Bank Public. It trades about -0.25 of its total potential returns per unit of risk. TMBThanachart Bank Public is currently generating about -0.01 per unit of volatility. If you would invest  189.00  in TMBThanachart Bank Public on September 14, 2024 and sell it today you would lose (2.00) from holding TMBThanachart Bank Public or give up 1.06% of portfolio value over 90 days.

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

Thai Oil Public  vs.  TMBThanachart Bank Public

Thai Oil Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thai Oil 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.

TMBThanachart Bank Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TMBThanachart Bank Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, TMBThanachart Bank is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Thai Oil and TMBThanachart Bank

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

The idea behind Thai Oil Public and TMBThanachart Bank 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.