Correlation Between Erawan and East Coast
Can any of the company-specific risk be diversified away by investing in both Erawan and East Coast 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 East Coast 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 East Coast Furnitech, you can compare the effects of market volatilities on Erawan and East Coast 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 East Coast. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erawan and East Coast.
Diversification Opportunities for Erawan and East Coast
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Erawan and East is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding The Erawan Group and East Coast Furnitech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East Coast Furnitech 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 East Coast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East Coast Furnitech has no effect on the direction of Erawan i.e., Erawan and East Coast go up and down completely randomly.
Pair Corralation between Erawan and East Coast
Assuming the 90 days trading horizon The Erawan Group is expected to generate 0.47 times more return on investment than East Coast. However, The Erawan Group is 2.13 times less risky than East Coast. It trades about -0.13 of its potential returns per unit of risk. East Coast Furnitech is currently generating about -0.4 per unit of risk. If you would invest 342.00 in The Erawan Group on November 29, 2024 and sell it today you would lose (26.00) from holding The Erawan Group or give up 7.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Erawan Group vs. East Coast Furnitech
Performance |
| Timeline |
| Erawan Group |
| East Coast Furnitech |
Erawan and East Coast Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Erawan and East Coast
The main advantage of trading using opposite Erawan and East Coast positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Erawan position performs unexpectedly, East Coast 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 East Coast will offset losses from the drop in East Coast's long position.| Erawan vs. Central Plaza Hotel | Erawan vs. Minor International Public | Erawan vs. Central Pattana Public | Erawan vs. CP ALL Public |
| East Coast vs. G Capital Public | East Coast vs. E for L | East Coast vs. Filter Vision Public | East Coast vs. Chewathai 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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