Correlation Between Krung Thai and LPN Development
Can any of the company-specific risk be diversified away by investing in both Krung Thai and LPN Development 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 LPN Development 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 LPN Development Public, you can compare the effects of market volatilities on Krung Thai and LPN Development 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 LPN Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Krung Thai and LPN Development.
Diversification Opportunities for Krung Thai and LPN Development
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Krung and LPN is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Krung Thai Bank and LPN Development Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LPN Development 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 LPN Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LPN Development Public has no effect on the direction of Krung Thai i.e., Krung Thai and LPN Development go up and down completely randomly.
Pair Corralation between Krung Thai and LPN Development
Assuming the 90 days trading horizon Krung Thai is expected to generate 52.4 times less return on investment than LPN Development. But when comparing it to its historical volatility, Krung Thai Bank is 42.52 times less risky than LPN Development. It trades about 0.04 of its potential returns per unit of risk. LPN Development Public is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 392.00 in LPN Development Public on September 12, 2024 and sell it today you would lose (108.00) from holding LPN Development Public or give up 27.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Krung Thai Bank vs. LPN Development Public
Performance |
| Timeline |
| Krung Thai Bank |
| LPN Development Public |
Krung Thai and LPN Development Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Krung Thai and LPN Development
The main advantage of trading using opposite Krung Thai and LPN Development positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Krung Thai position performs unexpectedly, LPN Development 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 LPN Development will offset losses from the drop in LPN Development's long position.| Krung Thai vs. Bangkok Bank Public | Krung Thai vs. SCB X Public | Krung Thai vs. Kasikornbank Public | Krung Thai vs. PTT Public |
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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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