Correlation Between Thai Vegetable and Erawan

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

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

Diversification Opportunities for Thai Vegetable and Erawan

0.5

Correlation Coefficient

Thai Vegetable  Erawan

Very weak diversification

The 3 months correlation between Thai and Erawan is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Thai Vegetable Oil and The Erawan Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erawan Group and Thai Vegetable 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 Thai Vegetable Oil 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 Thai Vegetable i.e., Thai Vegetable and Erawan go up and down completely randomly.

Pair Corralation between Thai Vegetable and Erawan

Assuming the 90 days trading horizon Thai Vegetable is expected to generate 88.35 times less return on investment than Erawan. But when comparing it to its historical volatility, Thai Vegetable Oil is 51.96 times less risky than Erawan. It trades about 0.03 of its potential returns per unit of risk. The Erawan Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  477.00  in The Erawan Group on October 9, 2024 and sell it today you would lose (117.00) from holding The Erawan Group or give up 24.53% of portfolio value over 90 days.

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

Thai Vegetable Oil  vs.  The Erawan Group

Thai Vegetable Oil

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Thai Vegetable and Erawan

The main advantage of trading using opposite Thai Vegetable and Erawan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thai Vegetable 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 Thai Vegetable Oil 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.