Correlation Between Erawan and LPN Development
Can any of the company-specific risk be diversified away by investing in both Erawan and LPN Development 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 LPN Development 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 LPN Development Public, you can compare the effects of market volatilities on Erawan and LPN Development 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 LPN Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erawan and LPN Development.
Diversification Opportunities for Erawan and LPN Development
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Erawan and LPN is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding The Erawan Group and LPN Development Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LPN Development Public 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 LPN Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LPN Development Public has no effect on the direction of Erawan i.e., Erawan and LPN Development go up and down completely randomly.
Pair Corralation between Erawan and LPN Development
Assuming the 90 days trading horizon The Erawan Group is expected to generate 1.0 times more return on investment than LPN Development. However, The Erawan Group is 1.0 times less risky than LPN Development. It trades about 0.06 of its potential returns per unit of risk. LPN Development Public is currently generating about 0.05 per unit of risk. If you would invest 487.00 in The Erawan Group on November 3, 2024 and sell it today you would lose (151.00) from holding The Erawan Group or give up 31.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.59% |
| Values | Daily Returns |
The Erawan Group vs. LPN Development Public
Performance |
| Timeline |
| Erawan Group |
| LPN Development Public |
Erawan and LPN Development Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Erawan and LPN Development
The main advantage of trading using opposite Erawan and LPN Development positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Erawan position performs unexpectedly, LPN Development 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 LPN Development will offset losses from the drop in LPN Development's long position.| Erawan vs. Central Plaza Hotel | Erawan vs. Minor International Public | Erawan vs. Central Pattana Public | Erawan vs. CP ALL Public |
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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 Stocks Directory module to find actively traded stocks across global markets.
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