Correlation Between Erawan and Pacific Pipe
Can any of the company-specific risk be diversified away by investing in both Erawan and Pacific Pipe 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 Pacific Pipe 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 Pacific Pipe Public, you can compare the effects of market volatilities on Erawan and Pacific Pipe 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 Pacific Pipe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erawan and Pacific Pipe.
Diversification Opportunities for Erawan and Pacific Pipe
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Erawan and Pacific is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding The Erawan Group and Pacific Pipe Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Pipe 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 Pacific Pipe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Pipe Public has no effect on the direction of Erawan i.e., Erawan and Pacific Pipe go up and down completely randomly.
Pair Corralation between Erawan and Pacific Pipe
Assuming the 90 days trading horizon The Erawan Group is expected to generate 0.89 times more return on investment than Pacific Pipe. However, The Erawan Group is 1.13 times less risky than Pacific Pipe. It trades about 0.14 of its potential returns per unit of risk. Pacific Pipe Public is currently generating about -0.23 per unit of risk. If you would invest 388.00 in The Erawan Group on September 13, 2024 and sell it today you would earn a total of 20.00 from holding The Erawan Group or generate 5.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Erawan Group vs. Pacific Pipe Public
Performance |
| Timeline |
| Erawan Group |
| Pacific Pipe Public |
Erawan and Pacific Pipe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Erawan and Pacific Pipe
The main advantage of trading using opposite Erawan and Pacific Pipe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Erawan position performs unexpectedly, Pacific Pipe 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 Pacific Pipe will offset losses from the drop in Pacific Pipe's long position.| Erawan vs. Hwa Fong Rubber | Erawan vs. AAPICO Hitech Public | Erawan vs. Haad Thip Public | Erawan vs. Italian Thai Development Public |
| Pacific Pipe vs. Thantawan Industry Public | Pacific Pipe vs. The Erawan Group | Pacific Pipe vs. Jay Mart Public | Pacific Pipe vs. Airports of Thailand |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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