Correlation Between Erawan and Krungthai Card

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

Diversification Opportunities for Erawan and Krungthai Card

-0.14

Correlation Coefficient

Erawan  Krungthai Card

Good diversification

The 3 months correlation between Erawan and Krungthai is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding The Erawan Group and Krungthai Card Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Krungthai Card 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 Krungthai Card. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Krungthai Card Public has no effect on the direction of Erawan i.e., Erawan and Krungthai Card go up and down completely randomly.

Pair Corralation between Erawan and Krungthai Card

Assuming the 90 days trading horizon Erawan is expected to generate 2.02 times less return on investment than Krungthai Card. But when comparing it to its historical volatility, The Erawan Group is 1.41 times less risky than Krungthai Card. It trades about 0.04 of its potential returns per unit of risk. Krungthai Card Public is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  5,935  in Krungthai Card Public on September 23, 2024 and sell it today you would lose (1,235) from holding Krungthai Card Public or give up 20.81% 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.  Krungthai Card Public

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.

Krungthai Card Public

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Krungthai Card Public are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Krungthai Card sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Erawan and Krungthai Card

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

The idea behind The Erawan Group and Krungthai Card 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.