Correlation Between Erawan and Khon Kaen
Can any of the company-specific risk be diversified away by investing in both Erawan and Khon Kaen 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 Khon Kaen 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 Khon Kaen Sugar, you can compare the effects of market volatilities on Erawan and Khon Kaen 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 Khon Kaen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erawan and Khon Kaen.
Diversification Opportunities for Erawan and Khon Kaen
Very weak diversification
The 3 months correlation between Erawan and Khon is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding The Erawan Group and Khon Kaen Sugar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Khon Kaen Sugar 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 Khon Kaen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Khon Kaen Sugar has no effect on the direction of Erawan i.e., Erawan and Khon Kaen go up and down completely randomly.
Pair Corralation between Erawan and Khon Kaen
Assuming the 90 days trading horizon Erawan is expected to generate 1.0 times less return on investment than Khon Kaen. In addition to that, Erawan is 1.0 times more volatile than Khon Kaen Sugar. It trades about 0.06 of its total potential returns per unit of risk. Khon Kaen Sugar is currently generating about 0.06 per unit of volatility. If you would invest 247.00 in Khon Kaen Sugar on September 12, 2024 and sell it today you would lose (48.00) from holding Khon Kaen Sugar or give up 19.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Erawan Group vs. Khon Kaen Sugar
Performance |
| Timeline |
| Erawan Group |
| Khon Kaen Sugar |
Erawan and Khon Kaen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Erawan and Khon Kaen
The main advantage of trading using opposite Erawan and Khon Kaen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Erawan position performs unexpectedly, Khon Kaen 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 Khon Kaen will offset losses from the drop in Khon Kaen's long position.| Erawan vs. Central Plaza Hotel | Erawan vs. Minor International Public | Erawan vs. Central Pattana Public | Erawan vs. CP ALL Public |
| Khon Kaen vs. GFPT Public | Khon Kaen vs. Dynasty Ceramic Public | Khon Kaen vs. Haad Thip Public | Khon Kaen vs. The Erawan Group |
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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