Correlation Between Erawan and ASIA Capital

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

By analyzing existing cross correlation between The Erawan Group and ASIA Capital Group, you can compare the effects of market volatilities on Erawan and ASIA Capital 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 Erawan with a short position of ASIA Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erawan and ASIA Capital.

Diversification Opportunities for Erawan and ASIA Capital

-0.12

Correlation Coefficient

Erawan  ASIA Capital

Good diversification

The 3 months correlation between Erawan and ASIA is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding The Erawan Group and ASIA Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASIA Capital Group and Erawan 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 The Erawan Group are associated (or correlated) with ASIA Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASIA Capital Group has no effect on the direction of Erawan i.e., Erawan and ASIA Capital go up and down completely randomly.

Pair Corralation between Erawan and ASIA Capital

Assuming the 90 days trading horizon The Erawan Group is expected to generate 0.12 times more return on investment than ASIA Capital. However, The Erawan Group is 8.4 times less risky than ASIA Capital. It trades about -0.04 of its potential returns per unit of risk. ASIA Capital Group is currently generating about -0.22 per unit of risk. If you would invest  402.00  in The Erawan Group on September 29, 2024 and sell it today you would lose (12.00) from holding The Erawan Group or give up 2.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

The Erawan Group  vs.  ASIA Capital Group

Erawan Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Erawan Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

ASIA Capital Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ASIA Capital Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, ASIA Capital disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Erawan and ASIA Capital

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

The idea behind The Erawan Group and ASIA Capital Group 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.