Correlation Between Banco Comercial and Thai Airways

Can any of the company-specific risk be diversified away by investing in both Banco Comercial and Thai Airways 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 Banco Comercial and Thai Airways into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Banco Comercial Portugues and Thai Airways International, you can compare the effects of market volatilities on Banco Comercial and Thai Airways 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 Banco Comercial with a short position of Thai Airways. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Comercial and Thai Airways.

Diversification Opportunities for Banco Comercial and Thai Airways

0.37

Correlation Coefficient

Banco Comercial  Thai Airways

Weak diversification

The 3 months correlation between Banco and Thai is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Banco Comercial Portugues and Thai Airways International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Airways Interna and Banco Comercial 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 Banco Comercial Portugues are associated (or correlated) with Thai Airways. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Airways Interna has no effect on the direction of Banco Comercial i.e., Banco Comercial and Thai Airways go up and down completely randomly.

Pair Corralation between Banco Comercial and Thai Airways

Assuming the 90 days trading horizon Banco Comercial is expected to generate 12.89 times less return on investment than Thai Airways. But when comparing it to its historical volatility, Banco Comercial Portugues is 14.16 times less risky than Thai Airways. It trades about 0.15 of its potential returns per unit of risk. Thai Airways International is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  0.80  in Thai Airways International on January 25, 2024 and sell it today you would earn a total of  0.10  from holding Thai Airways International or generate 12.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.62%
Values	Daily Returns

Banco Comercial Portugues  vs.  Thai Airways International

Banco Comercial Portugues

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Comercial Portugues are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Banco Comercial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Thai Airways Interna

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Thai Airways International are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Thai Airways reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banco Comercial and Thai Airways

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

The idea behind Banco Comercial Portugues and Thai Airways International 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.