Correlation Between Bangkok Insurance and Muangthai Capital

Can any of the company-specific risk be diversified away by investing in both Bangkok Insurance and Muangthai Capital 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 Bangkok Insurance and Muangthai Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Bangkok Insurance and Muangthai Capital

0.28

Correlation Coefficient

Bangkok Insurance  Muangthai Capital

Modest diversification

The 3 months correlation between Bangkok and Muangthai is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Bangkok Insurance Public and Muangthai Capital Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Muangthai Capital Public and Bangkok Insurance 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 Bangkok Insurance Public are associated (or correlated) with Muangthai Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Muangthai Capital Public has no effect on the direction of Bangkok Insurance i.e., Bangkok Insurance and Muangthai Capital go up and down completely randomly.

Pair Corralation between Bangkok Insurance and Muangthai Capital

Assuming the 90 days trading horizon Bangkok Insurance Public is expected to under-perform the Muangthai Capital. But the stock apears to be less risky and, when comparing its historical volatility, Bangkok Insurance Public is 1.84 times less risky than Muangthai Capital. The stock trades about -0.25 of its potential returns per unit of risk. The Muangthai Capital Public is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  4,554  in Muangthai Capital Public on January 31, 2024 and sell it today you would lose (4.00) from holding Muangthai Capital Public or give up 0.09% of portfolio value over 90 days.

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

Bangkok Insurance Public  vs.  Muangthai Capital Public

Bangkok Insurance Public

Risk-Adjusted Performance

0 of 100

Very Weak

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

Muangthai Capital Public

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Muangthai Capital Public are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, Muangthai Capital may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Bangkok Insurance and Muangthai Capital

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

The idea behind Bangkok Insurance Public and Muangthai Capital 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.