Correlation Between Erawan and G J

Can any of the company-specific risk be diversified away by investing in both Erawan and G J 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 G J 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 G J Steel, you can compare the effects of market volatilities on Erawan and G J 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 G J. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erawan and G J.

Diversification Opportunities for Erawan and G J

0.22

Correlation Coefficient

Erawan  G J

Modest diversification

The 3 months correlation between Erawan and GJS is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding The Erawan Group and G J Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G J Steel 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 G J. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G J Steel has no effect on the direction of Erawan i.e., Erawan and G J go up and down completely randomly.

Pair Corralation between Erawan and G J

Assuming the 90 days trading horizon The Erawan Group is expected to generate 0.49 times more return on investment than G J. However, The Erawan Group is 2.03 times less risky than G J. It trades about 0.02 of its potential returns per unit of risk. G J Steel is currently generating about -0.02 per unit of risk. If you would invest  394.00  in The Erawan Group on September 13, 2024 and sell it today you would earn a total of  6.00  from holding The Erawan Group or generate 1.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

The Erawan Group  vs.  G J Steel

Erawan Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Erawan Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Erawan is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

G J Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days G J Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Erawan and G J

The main advantage of trading using opposite Erawan and G J positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Erawan position performs unexpectedly, G J 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 G J will offset losses from the drop in G J's long position.

The idea behind The Erawan Group and G J Steel pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.