Correlation Between Erawan and Diamond Building
Can any of the company-specific risk be diversified away by investing in both Erawan and Diamond Building 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 Diamond Building 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 Diamond Building Products, you can compare the effects of market volatilities on Erawan and Diamond Building 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 Diamond Building. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erawan and Diamond Building.
Diversification Opportunities for Erawan and Diamond Building
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Erawan and Diamond is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding The Erawan Group and Diamond Building Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Building Products 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 Diamond Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Building Products has no effect on the direction of Erawan i.e., Erawan and Diamond Building go up and down completely randomly.
Pair Corralation between Erawan and Diamond Building
Assuming the 90 days trading horizon The Erawan Group is expected to generate 101.6 times more return on investment than Diamond Building. However, Erawan is 101.6 times more volatile than Diamond Building Products. It trades about 0.05 of its potential returns per unit of risk. Diamond Building Products is currently generating about 0.02 per unit of risk. If you would invest 542.00 in The Erawan Group on September 15, 2024 and sell it today you would lose (150.00) from holding The Erawan Group or give up 27.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Erawan Group vs. Diamond Building Products
Performance |
| Timeline |
| Erawan Group |
| Diamond Building Products |
Erawan and Diamond Building Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Erawan and Diamond Building
The main advantage of trading using opposite Erawan and Diamond Building positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Erawan position performs unexpectedly, Diamond Building 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 Diamond Building will offset losses from the drop in Diamond Building's long position.| Erawan vs. Hwa Fong Rubber | Erawan vs. AAPICO Hitech Public | Erawan vs. Haad Thip Public | Erawan vs. Italian Thai Development Public |
| Diamond Building vs. Haad Thip Public | Diamond Building vs. Lalin Property Public | Diamond Building vs. Dynasty Ceramic Public | Diamond Building vs. AP Public |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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