Correlation Between Erawan and Cho Thavee

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

Diversification Opportunities for Erawan and Cho Thavee

0.56

Correlation Coefficient

Erawan  Cho Thavee

Very weak diversification

The 3 months correlation between Erawan and Cho is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding The Erawan Group and Cho Thavee Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cho Thavee 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 Cho Thavee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cho Thavee Public has no effect on the direction of Erawan i.e., Erawan and Cho Thavee go up and down completely randomly.

Pair Corralation between Erawan and Cho Thavee

Assuming the 90 days trading horizon The Erawan Group is expected to under-perform the Cho Thavee. But the stock apears to be less risky and, when comparing its historical volatility, The Erawan Group is 6.58 times less risky than Cho Thavee. The stock trades about -0.17 of its potential returns per unit of risk. The Cho Thavee Public is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  5.00  in Cho Thavee Public on December 28, 2024 and sell it today you would lose (2.00) from holding Cho Thavee Public or give up 40.0% of portfolio value over 90 days.

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

The Erawan Group  vs.  Cho Thavee 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.

Cho Thavee Public

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cho Thavee Public are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Cho Thavee disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Erawan and Cho Thavee

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

The idea behind The Erawan Group and Cho Thavee 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..