Correlation Between Erawan and Chewathai Public

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

Diversification Opportunities for Erawan and Chewathai Public

0.79

Correlation Coefficient

Erawan  Chewathai Public

Poor diversification

The 3 months correlation between Erawan and Chewathai is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding The Erawan Group and Chewathai Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chewathai 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 Chewathai Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chewathai Public has no effect on the direction of Erawan i.e., Erawan and Chewathai Public go up and down completely randomly.

Pair Corralation between Erawan and Chewathai Public

Assuming the 90 days trading horizon The Erawan Group is expected to generate 1.0 times more return on investment than Chewathai Public. However, The Erawan Group is 1.0 times less risky than Chewathai Public. It trades about 0.13 of its potential returns per unit of risk. Chewathai Public is currently generating about 0.13 per unit of risk. If you would invest  0.00  in The Erawan Group on September 3, 2024 and sell it today you would earn a total of  400.00  from holding The Erawan Group or generate 9.223372036854776E16% return on investment over 90 days.

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

The Erawan Group  vs.  Chewathai Public

Erawan Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Erawan Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Erawan disclosed solid returns over the last few months and may actually be approaching a breakup point.

Chewathai Public

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chewathai Public are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental drivers, Chewathai Public sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Erawan and Chewathai Public

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

The idea behind The Erawan Group and Chewathai 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.

Check out your portfolio center.

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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.