Correlation Between Royal Orchid and Krung Thai
Can any of the company-specific risk be diversified away by investing in both Royal Orchid and Krung Thai 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 Royal Orchid and Krung Thai into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Royal Orchid Hotel and Krung Thai Bank, you can compare the effects of market volatilities on Royal Orchid and Krung Thai 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 Royal Orchid with a short position of Krung Thai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royal Orchid and Krung Thai.
Diversification Opportunities for Royal Orchid and Krung Thai
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Royal and Krung is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Royal Orchid Hotel and Krung Thai Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Krung Thai Bank and Royal Orchid 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 Royal Orchid Hotel are associated (or correlated) with Krung Thai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Krung Thai Bank has no effect on the direction of Royal Orchid i.e., Royal Orchid and Krung Thai go up and down completely randomly.
Pair Corralation between Royal Orchid and Krung Thai
Assuming the 90 days trading horizon Royal Orchid Hotel is expected to generate 4.47 times more return on investment than Krung Thai. However, Royal Orchid is 4.47 times more volatile than Krung Thai Bank. It trades about 0.03 of its potential returns per unit of risk. Krung Thai Bank is currently generating about -0.26 per unit of risk. If you would invest 226.00 in Royal Orchid Hotel on August 31, 2024 and sell it today you would earn a total of 2.00 from holding Royal Orchid Hotel or generate 0.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Royal Orchid Hotel vs. Krung Thai Bank
Performance |
| Timeline |
| Royal Orchid Hotel |
| Krung Thai Bank |
Royal Orchid and Krung Thai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royal Orchid and Krung Thai
The main advantage of trading using opposite Royal Orchid and Krung Thai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royal Orchid position performs unexpectedly, Krung Thai 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 Krung Thai will offset losses from the drop in Krung Thai's long position.| Royal Orchid vs. Laguna Resorts Hotels | Royal Orchid vs. Shangri La Hotel Public | Royal Orchid vs. Ramkhamhaeng Hospital Public | Royal Orchid vs. Regional Container Lines |
| Krung Thai vs. Bangkok Bank Public | Krung Thai vs. SCB X Public | Krung Thai vs. Kasikornbank Public | Krung Thai vs. PTT Public |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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