Correlation Between Erawan and LH Shopping

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

Diversification Opportunities for Erawan and LH Shopping

0.28

Correlation Coefficient

Erawan  LH Shopping

Modest diversification

The 3 months correlation between Erawan and LHSC is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding The Erawan Group and LH Shopping Centers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LH Shopping Centers 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 LH Shopping. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LH Shopping Centers has no effect on the direction of Erawan i.e., Erawan and LH Shopping go up and down completely randomly.

Pair Corralation between Erawan and LH Shopping

Assuming the 90 days trading horizon The Erawan Group is expected to generate 32.03 times more return on investment than LH Shopping. However, Erawan is 32.03 times more volatile than LH Shopping Centers. It trades about 0.04 of its potential returns per unit of risk. LH Shopping Centers is currently generating about 0.05 per unit of risk. If you would invest  432.00  in The Erawan Group on September 13, 2024 and sell it today you would lose (32.00) from holding The Erawan Group or give up 7.41% 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.  LH Shopping Centers

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.

LH Shopping Centers

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LH Shopping Centers are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, LH Shopping disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Erawan and LH Shopping

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

The idea behind The Erawan Group and LH Shopping Centers 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.