Correlation Between Erawan and VGI Public

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

Diversification Opportunities for Erawan and VGI Public

-0.1

Correlation Coefficient

Erawan  VGI Public

Good diversification

The 3 months correlation between Erawan and VGI is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding The Erawan Group and VGI Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VGI 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 VGI Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VGI Public has no effect on the direction of Erawan i.e., Erawan and VGI Public go up and down completely randomly.

Pair Corralation between Erawan and VGI Public

Assuming the 90 days trading horizon Erawan is expected to generate 234.02 times less return on investment than VGI Public. But when comparing it to its historical volatility, The Erawan Group is 60.46 times less risky than VGI Public. It trades about 0.03 of its potential returns per unit of risk. VGI Public is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  286.00  in VGI Public on September 12, 2024 and sell it today you would lose (6.00) from holding VGI Public or give up 2.1% 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.  VGI Public

Erawan Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Erawan Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Erawan is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

VGI Public

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Erawan and VGI Public

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

The idea behind The Erawan Group and VGI 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.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.