Correlation Between KRUNG THAI and HDFC Bank
Can any of the company-specific risk be diversified away by investing in both KRUNG THAI and HDFC 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 KRUNG THAI and HDFC Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KRUNG THAI FGN and HDFC Bank Limited, you can compare the effects of market volatilities on KRUNG THAI and HDFC 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 KRUNG THAI with a short position of HDFC Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of KRUNG THAI and HDFC Bank.
Diversification Opportunities for KRUNG THAI and HDFC Bank
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between KRUNG and HDFC is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding KRUNG THAI FGN and HDFC Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HDFC Bank Limited 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 FGN are associated (or correlated) with HDFC Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HDFC Bank Limited has no effect on the direction of KRUNG THAI i.e., KRUNG THAI and HDFC Bank go up and down completely randomly.
Pair Corralation between KRUNG THAI and HDFC Bank
Assuming the 90 days trading horizon KRUNG THAI FGN is expected to generate 1.0 times more return on investment than HDFC Bank. However, KRUNG THAI FGN is 1.0 times less risky than HDFC Bank. It trades about 0.01 of its potential returns per unit of risk. HDFC Bank Limited is currently generating about -0.07 per unit of risk. If you would invest 59.00 in KRUNG THAI FGN on December 11, 2024 and sell it today you would earn a total of 0.00 from holding KRUNG THAI FGN or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
KRUNG THAI FGN vs. HDFC Bank Limited
Performance |
| Timeline |
| KRUNG THAI FGN |
| HDFC Bank Limited |
KRUNG THAI and HDFC Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KRUNG THAI and HDFC Bank
The main advantage of trading using opposite KRUNG THAI and HDFC Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KRUNG THAI position performs unexpectedly, HDFC 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 HDFC Bank will offset losses from the drop in HDFC Bank's long position.| KRUNG THAI vs. Bangkok Bank Public | KRUNG THAI vs. Kasikornbank Public | KRUNG THAI vs. Krung Thai Bank | KRUNG THAI vs. TMBThanachart Bank 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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