Correlation Between Erawan and RS Public

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

Diversification Opportunities for Erawan and RS Public

-0.12

Correlation Coefficient

Erawan  RS Public

Good diversification

The 3 months correlation between Erawan and RS Public is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding The Erawan Group and RS Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RS 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 RS Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RS Public has no effect on the direction of Erawan i.e., Erawan and RS Public go up and down completely randomly.

Pair Corralation between Erawan and RS Public

Assuming the 90 days trading horizon The Erawan Group is expected to generate 1.87 times more return on investment than RS Public. However, Erawan is 1.87 times more volatile than RS Public. It trades about 0.04 of its potential returns per unit of risk. RS Public is currently generating about -0.04 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  14.00  from holding The Erawan Group or generate 3.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

The Erawan Group  vs.  RS Public

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.

RS Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RS Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, RS Public 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 RS Public

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

The idea behind The Erawan Group and RS 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.