Correlation Between Erawan and Thai Coating

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

Diversification Opportunities for Erawan and Thai Coating

0.2

Correlation Coefficient

Erawan  Thai Coating

Modest diversification

The 3 months correlation between Erawan and Thai is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding The Erawan Group and Thai Coating Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Coating Industrial 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 Thai Coating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Coating Industrial has no effect on the direction of Erawan i.e., Erawan and Thai Coating go up and down completely randomly.

Pair Corralation between Erawan and Thai Coating

Assuming the 90 days trading horizon Erawan is expected to generate 10.36 times less return on investment than Thai Coating. But when comparing it to its historical volatility, The Erawan Group is 2.29 times less risky than Thai Coating. It trades about 0.01 of its potential returns per unit of risk. Thai Coating Industrial is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,500  in Thai Coating Industrial on September 15, 2024 and sell it today you would earn a total of  50.00  from holding Thai Coating Industrial or generate 2.0% return on investment over 90 days.

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

The Erawan Group  vs.  Thai Coating Industrial

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 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.

Thai Coating Industrial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Thai Coating Industrial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental drivers, Thai Coating may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Erawan and Thai Coating

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

The idea behind The Erawan Group and Thai Coating Industrial 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.