Correlation Between Erawan and Quality Houses

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

Diversification Opportunities for Erawan and Quality Houses

0.45

Correlation Coefficient

Erawan  Quality Houses

Very weak diversification

The 3 months correlation between Erawan and Quality is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding The Erawan Group and Quality Houses Property in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quality Houses Property 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 Quality Houses. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quality Houses Property has no effect on the direction of Erawan i.e., Erawan and Quality Houses go up and down completely randomly.

Pair Corralation between Erawan and Quality Houses

Assuming the 90 days trading horizon The Erawan Group is expected to generate 9.3 times more return on investment than Quality Houses. However, Erawan is 9.3 times more volatile than Quality Houses Property. It trades about 0.04 of its potential returns per unit of risk. Quality Houses Property is currently generating about -0.06 per unit of risk. If you would invest  443.00  in The Erawan Group on October 7, 2024 and sell it today you would lose (73.00) from holding The Erawan Group or give up 16.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

The Erawan Group  vs.  Quality Houses Property

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

Quality Houses Property

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Quality Houses Property has generated negative risk-adjusted returns adding no value to fund investors. Despite conflicting performance in the last few months, the Fund's forward-looking signals remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the fund institutional investors.

Pair Trading with Erawan and Quality Houses

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

The idea behind The Erawan Group and Quality Houses Property 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.