Correlation Between Erawan and Steel Public
Can any of the company-specific risk be diversified away by investing in both Erawan and Steel Public 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 Steel Public 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 The Steel Public, you can compare the effects of market volatilities on Erawan and Steel Public 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 Steel Public. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erawan and Steel Public.
Diversification Opportunities for Erawan and Steel Public
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Erawan and Steel is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding The Erawan Group and The Steel Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steel 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 Steel Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steel Public has no effect on the direction of Erawan i.e., Erawan and Steel Public go up and down completely randomly.
Pair Corralation between Erawan and Steel Public
Assuming the 90 days trading horizon The Erawan Group is expected to generate 1.0 times more return on investment than Steel Public. However, The Erawan Group is 1.0 times less risky than Steel Public. It trades about 0.04 of its potential returns per unit of risk. The Steel Public is currently generating about 0.04 per unit of risk. If you would invest 447.00 in The Erawan Group on August 31, 2024 and sell it today you would lose (45.00) from holding The Erawan Group or give up 10.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Erawan Group vs. The Steel Public
Performance |
| Timeline |
| Erawan Group |
| Steel Public |
Erawan and Steel Public Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Erawan and Steel Public
The main advantage of trading using opposite Erawan and Steel Public positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Erawan position performs unexpectedly, Steel Public 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 Steel Public will offset losses from the drop in Steel Public'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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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