Correlation Between Erawan and Airports
Can any of the company-specific risk be diversified away by investing in both Erawan and Airports 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 Airports 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 Airports of Thailand, you can compare the effects of market volatilities on Erawan and Airports 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 Airports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erawan and Airports.
Diversification Opportunities for Erawan and Airports
Very weak diversification
The 3 months correlation between Erawan and Airports is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding The Erawan Group and Airports of Thailand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airports of Thailand 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 Airports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airports of Thailand has no effect on the direction of Erawan i.e., Erawan and Airports go up and down completely randomly.
Pair Corralation between Erawan and Airports
Assuming the 90 days trading horizon The Erawan Group is expected to generate 1.77 times more return on investment than Airports. However, Erawan is 1.77 times more volatile than Airports of Thailand. It trades about 0.14 of its potential returns per unit of risk. Airports of Thailand is currently generating about 0.01 per unit of risk. If you would invest 392.00 in The Erawan Group on August 24, 2024 and sell it today you would earn a total of 24.00 from holding The Erawan Group or generate 6.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Erawan Group vs. Airports of Thailand
Performance |
| Timeline |
| Erawan Group |
| Airports of Thailand |
Erawan and Airports Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Erawan and Airports
The main advantage of trading using opposite Erawan and Airports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Erawan position performs unexpectedly, Airports 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 Airports will offset losses from the drop in Airports' long position.| Erawan vs. Central Plaza Hotel | Erawan vs. Minor International Public | Erawan vs. Central Pattana Public | Erawan vs. CP ALL Public |
| Airports vs. CP ALL Public | Airports vs. PTT Public | Airports vs. Kasikornbank Public | Airports vs. Bangkok Dusit Medical |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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