Correlation Between Bangkok Chain and Bumrungrad Hospital

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

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

Diversification Opportunities for Bangkok Chain and Bumrungrad Hospital

0.29

Correlation Coefficient

Bangkok Chain  Bumrungrad Hospital

Modest diversification

The 3 months correlation between Bangkok and Bumrungrad is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Bangkok Chain Hospital and Bumrungrad Hospital Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bumrungrad Hospital and Bangkok Chain 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 Chain Hospital are associated (or correlated) with Bumrungrad Hospital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bumrungrad Hospital has no effect on the direction of Bangkok Chain i.e., Bangkok Chain and Bumrungrad Hospital go up and down completely randomly.

Pair Corralation between Bangkok Chain and Bumrungrad Hospital

Assuming the 90 days trading horizon Bangkok Chain Hospital is expected to under-perform the Bumrungrad Hospital. But the stock apears to be less risky and, when comparing its historical volatility, Bangkok Chain Hospital is 2.01 times less risky than Bumrungrad Hospital. The stock trades about -0.2 of its potential returns per unit of risk. The Bumrungrad Hospital Public is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  23,200  in Bumrungrad Hospital Public on February 6, 2024 and sell it today you would earn a total of  1,900  from holding Bumrungrad Hospital Public or generate 8.19% return on investment over 90 days.

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

Bangkok Chain Hospital  vs.  Bumrungrad Hospital Public

Bangkok Chain Hospital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bangkok Chain Hospital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Bumrungrad Hospital

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bumrungrad Hospital Public are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental drivers, Bumrungrad Hospital may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Bangkok Chain and Bumrungrad Hospital

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

The idea behind Bangkok Chain Hospital and Bumrungrad Hospital 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.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.