Correlation Between Krungthai Card and Erawan

Can any of the company-specific risk be diversified away by investing in both Krungthai Card and Erawan 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 Krungthai Card and Erawan into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Krungthai Card Public and The Erawan Group, you can compare the effects of market volatilities on Krungthai Card and Erawan 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 Krungthai Card with a short position of Erawan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Krungthai Card and Erawan.

Diversification Opportunities for Krungthai Card and Erawan

-0.14

Correlation Coefficient

Krungthai Card  Erawan

Good diversification

The 3 months correlation between Krungthai and Erawan is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Krungthai Card Public and The Erawan Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erawan Group and Krungthai Card 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 Krungthai Card Public are associated (or correlated) with Erawan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erawan Group has no effect on the direction of Krungthai Card i.e., Krungthai Card and Erawan go up and down completely randomly.

Pair Corralation between Krungthai Card and Erawan

Assuming the 90 days trading horizon Krungthai Card Public is expected to generate 1.41 times more return on investment than Erawan. However, Krungthai Card is 1.41 times more volatile than The Erawan Group. It trades about 0.06 of its potential returns per unit of risk. The Erawan Group is currently generating about 0.04 per unit of risk. If you would invest  5,935  in Krungthai Card Public on September 23, 2024 and sell it today you would lose (1,235) from holding Krungthai Card Public or give up 20.81% of portfolio value over 90 days.

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

Krungthai Card Public  vs.  The Erawan Group

Krungthai Card Public

Risk-Adjusted Performance

8 of 100

OK

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

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

Pair Trading with Krungthai Card and Erawan

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

The idea behind Krungthai Card Public and The Erawan Group 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 Global Correlations module to find global opportunities by holding instruments from different markets.