Correlation Between Erawan and Business Online

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

Diversification Opportunities for Erawan and Business Online

-0.09

Correlation Coefficient

Erawan  Business Online

Good diversification

The 3 months correlation between Erawan and Business is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding The Erawan Group and Business Online PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Business Online PCL 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 Business Online. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Business Online PCL has no effect on the direction of Erawan i.e., Erawan and Business Online go up and down completely randomly.

Pair Corralation between Erawan and Business Online

Assuming the 90 days trading horizon The Erawan Group is expected to generate 1.04 times more return on investment than Business Online. However, Erawan is 1.04 times more volatile than Business Online PCL. It trades about 0.03 of its potential returns per unit of risk. Business Online PCL is currently generating about -0.14 per unit of risk. If you would invest  396.00  in The Erawan Group on September 12, 2024 and sell it today you would earn a total of  10.00  from holding The Erawan Group or generate 2.53% return on investment over 90 days.

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

The Erawan Group  vs.  Business Online PCL

Erawan Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Erawan Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Erawan is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Business Online PCL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Business Online PCL 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 essential 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.

Pair Trading with Erawan and Business Online

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

The idea behind The Erawan Group and Business Online PCL 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.