Correlation Between Erawan and Thai Oil
Can any of the company-specific risk be diversified away by investing in both Erawan and Thai Oil 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 Thai Oil 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 Thai Oil Public, you can compare the effects of market volatilities on Erawan and Thai Oil 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 Thai Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erawan and Thai Oil.
Diversification Opportunities for Erawan and Thai Oil
Very weak diversification
The 3 months correlation between Erawan and Thai is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding The Erawan Group and Thai Oil Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Oil 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 Thai Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Oil Public has no effect on the direction of Erawan i.e., Erawan and Thai Oil go up and down completely randomly.
Pair Corralation between Erawan and Thai Oil
Assuming the 90 days trading horizon The Erawan Group is expected to under-perform the Thai Oil. But the stock apears to be less risky and, when comparing its historical volatility, The Erawan Group is 59.4 times less risky than Thai Oil. The stock trades about -0.16 of its potential returns per unit of risk. The Thai Oil Public is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 4,625 in Thai Oil Public on October 16, 2024 and sell it today you would lose (800.00) from holding Thai Oil Public or give up 17.3% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 88.14% |
Values | Daily Returns |
The Erawan Group vs. Thai Oil Public
Performance |
Timeline |
Erawan Group |
Thai Oil Public |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
Erawan and Thai Oil Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Erawan and Thai Oil
The main advantage of trading using opposite Erawan and Thai Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Erawan position performs unexpectedly, Thai Oil 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 Thai Oil will offset losses from the drop in Thai Oil's long position.Erawan vs. Central Plaza Hotel | ||
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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