Correlation Between Erawan and Interlink Telecom

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

Diversification Opportunities for Erawan and Interlink Telecom

0.25

Correlation Coefficient

Erawan  Interlink Telecom

Modest diversification

The 3 months correlation between Erawan and Interlink is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding The Erawan Group and Interlink Telecom Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interlink Telecom 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 Interlink Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Interlink Telecom Public has no effect on the direction of Erawan i.e., Erawan and Interlink Telecom go up and down completely randomly.

Pair Corralation between Erawan and Interlink Telecom

Assuming the 90 days trading horizon The Erawan Group is expected to under-perform the Interlink Telecom. But the stock apears to be less risky and, when comparing its historical volatility, The Erawan Group is 1.44 times less risky than Interlink Telecom. The stock trades about -0.14 of its potential returns per unit of risk. The Interlink Telecom Public is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  206.00  in Interlink Telecom Public on September 25, 2024 and sell it today you would lose (2.00) from holding Interlink Telecom Public or give up 0.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

The Erawan Group  vs.  Interlink Telecom Public

Erawan Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Erawan Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Interlink Telecom Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Interlink Telecom Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Interlink Telecom is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Erawan and Interlink Telecom

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

The idea behind The Erawan Group and Interlink Telecom Public 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.