Correlation Between Erawan and Multi National
Can any of the company-specific risk be diversified away by investing in both Erawan and Multi National 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 Multi National 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 Multi National Residence, you can compare the effects of market volatilities on Erawan and Multi National 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 Multi National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erawan and Multi National.
Diversification Opportunities for Erawan and Multi National
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Erawan and Multi is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding The Erawan Group and Multi National Residence in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi National Residence 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 Multi National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi National Residence has no effect on the direction of Erawan i.e., Erawan and Multi National go up and down completely randomly.
Pair Corralation between Erawan and Multi National
Assuming the 90 days trading horizon Erawan is expected to generate 39.27 times less return on investment than Multi National. But when comparing it to its historical volatility, The Erawan Group is 5.93 times less risky than Multi National. It trades about 0.05 of its potential returns per unit of risk. Multi National Residence is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 276.00 in Multi National Residence on September 12, 2024 and sell it today you would lose (276.00) from holding Multi National Residence or give up 100.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.33% |
| Values | Daily Returns |
The Erawan Group vs. Multi National Residence
Performance |
| Timeline |
| Erawan Group |
| Multi National Residence |
Erawan and Multi National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Erawan and Multi National
The main advantage of trading using opposite Erawan and Multi National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Erawan position performs unexpectedly, Multi National 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 Multi National will offset losses from the drop in Multi National'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 Global Correlations module to find global opportunities by holding instruments from different markets.
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