Correlation Between Erawan and Tropical Canning

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

Diversification Opportunities for Erawan and Tropical Canning

0.55

Correlation Coefficient

Erawan  Tropical Canning

Very weak diversification

The 3 months correlation between Erawan and Tropical is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding The Erawan Group and Tropical Canning Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tropical Canning 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 Tropical Canning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tropical Canning Public has no effect on the direction of Erawan i.e., Erawan and Tropical Canning go up and down completely randomly.

Pair Corralation between Erawan and Tropical Canning

Assuming the 90 days trading horizon The Erawan Group is expected to under-perform the Tropical Canning. In addition to that, Erawan is 1.36 times more volatile than Tropical Canning Public. It trades about -0.1 of its total potential returns per unit of risk. Tropical Canning Public is currently generating about -0.07 per unit of volatility. If you would invest  685.00  in Tropical Canning Public on December 22, 2024 and sell it today you would lose (60.00) from holding Tropical Canning Public or give up 8.76% 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.  Tropical Canning 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.

Tropical Canning Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tropical Canning Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental drivers remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Erawan and Tropical Canning

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

The idea behind The Erawan Group and Tropical Canning 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.