Correlation Between Erawan and Arinsiri Land

Can any of the company-specific risk be diversified away by investing in both Erawan and Arinsiri Land 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 Arinsiri Land 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 Arinsiri Land Public, you can compare the effects of market volatilities on Erawan and Arinsiri Land 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 Arinsiri Land. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erawan and Arinsiri Land.

Diversification Opportunities for Erawan and Arinsiri Land

0.7

Correlation Coefficient

Erawan  Arinsiri Land

Poor diversification

The 3 months correlation between Erawan and Arinsiri is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding The Erawan Group and Arinsiri Land Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arinsiri Land Public 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 Arinsiri Land. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arinsiri Land Public has no effect on the direction of Erawan i.e., Erawan and Arinsiri Land go up and down completely randomly.

Pair Corralation between Erawan and Arinsiri Land

Assuming the 90 days trading horizon The Erawan Group is expected to under-perform the Arinsiri Land. But the stock apears to be less risky and, when comparing its historical volatility, The Erawan Group is 2.73 times less risky than Arinsiri Land. The stock trades about -0.17 of its potential returns per unit of risk. The Arinsiri Land Public is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  64.00  in Arinsiri Land Public on December 28, 2024 and sell it today you would lose (16.00) from holding Arinsiri Land Public or give up 25.0% of portfolio value over 90 days.

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

The Erawan Group  vs.  Arinsiri Land Public

Erawan Group

Risk-Adjusted Performance

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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Arinsiri Land Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arinsiri Land Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Erawan and Arinsiri Land

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

The idea behind The Erawan Group and Arinsiri Land 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.