Correlation Between Erawan and PTT Global

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

Diversification Opportunities for Erawan and PTT Global

0.6

Correlation Coefficient

Erawan  PTT Global

Poor diversification

The 3 months correlation between Erawan and PTT is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding The Erawan Group and PTT Global Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PTT Global Chemical 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 PTT Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PTT Global Chemical has no effect on the direction of Erawan i.e., Erawan and PTT Global go up and down completely randomly.

Pair Corralation between Erawan and PTT Global

Assuming the 90 days trading horizon The Erawan Group is expected to generate 1.3 times more return on investment than PTT Global. However, Erawan is 1.3 times more volatile than PTT Global Chemical. It trades about 0.14 of its potential returns per unit of risk. PTT Global Chemical is currently generating about -0.03 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	Significant
Accuracy	100.0%
Values	Daily Returns

The Erawan Group  vs.  PTT Global Chemical

Erawan Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Erawan Group are ranked lower than 2 (%) 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.

PTT Global Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PTT Global Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, PTT Global is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Erawan and PTT Global

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

The idea behind The Erawan Group and PTT Global Chemical 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.