Correlation Between Erawan and Tipco Asphalt

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

Diversification Opportunities for Erawan and Tipco Asphalt

0.04

Correlation Coefficient

Erawan  Tipco Asphalt

Significant diversification

The 3 months correlation between Erawan and Tipco is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding The Erawan Group and Tipco Asphalt Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tipco Asphalt 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 Tipco Asphalt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tipco Asphalt Public has no effect on the direction of Erawan i.e., Erawan and Tipco Asphalt go up and down completely randomly.

Pair Corralation between Erawan and Tipco Asphalt

Assuming the 90 days trading horizon Erawan is expected to generate 2.19 times less return on investment than Tipco Asphalt. In addition to that, Erawan is 1.46 times more volatile than Tipco Asphalt Public. It trades about 0.04 of its total potential returns per unit of risk. Tipco Asphalt Public is currently generating about 0.12 per unit of volatility. If you would invest  1,790  in Tipco Asphalt Public on September 13, 2024 and sell it today you would earn a total of  190.00  from holding Tipco Asphalt Public or generate 10.61% return on investment over 90 days.

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

The Erawan Group  vs.  Tipco Asphalt 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.

Tipco Asphalt Public

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tipco Asphalt Public are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental drivers, Tipco Asphalt may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Erawan and Tipco Asphalt

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

The idea behind The Erawan Group and Tipco Asphalt 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.