Correlation Between Erawan and Univanich Palm

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

Diversification Opportunities for Erawan and Univanich Palm

-0.29

Correlation Coefficient

Erawan  Univanich Palm

Very good diversification

The 3 months correlation between Erawan and Univanich is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding The Erawan Group and Univanich Palm Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Univanich Palm Oil 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 Univanich Palm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Univanich Palm Oil has no effect on the direction of Erawan i.e., Erawan and Univanich Palm go up and down completely randomly.

Pair Corralation between Erawan and Univanich Palm

Assuming the 90 days trading horizon The Erawan Group is expected to under-perform the Univanich Palm. In addition to that, Erawan is 2.92 times more volatile than Univanich Palm Oil. It trades about -0.24 of its total potential returns per unit of risk. Univanich Palm Oil is currently generating about 0.13 per unit of volatility. If you would invest  925.00  in Univanich Palm Oil on October 11, 2024 and sell it today you would earn a total of  20.00  from holding Univanich Palm Oil or generate 2.16% return on investment over 90 days.

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

The Erawan Group  vs.  Univanich Palm Oil

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.

Univanich Palm Oil

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Univanich Palm Oil are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Univanich Palm may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Erawan and Univanich Palm

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

The idea behind The Erawan Group and Univanich Palm Oil 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.