Correlation Between Erawan and Thai Nam

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

Diversification Opportunities for Erawan and Thai Nam

0.36

Correlation Coefficient

Erawan  Thai Nam

Weak diversification

The 3 months correlation between Erawan and Thai is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding The Erawan Group and Thai Nam Plastic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Nam Plastic 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 Nam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Nam Plastic has no effect on the direction of Erawan i.e., Erawan and Thai Nam go up and down completely randomly.

Pair Corralation between Erawan and Thai Nam

Assuming the 90 days trading horizon The Erawan Group is expected to generate 1.03 times more return on investment than Thai Nam. However, Erawan is 1.03 times more volatile than Thai Nam Plastic. It trades about 0.01 of its potential returns per unit of risk. Thai Nam Plastic is currently generating about -0.08 per unit of risk. If you would invest  394.00  in The Erawan Group on September 15, 2024 and sell it today you would lose (2.00) from holding The Erawan Group or give up 0.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

The Erawan Group  vs.  Thai Nam Plastic

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 current stock price mess, may contribute to short-term losses for the institutional investors.

Thai Nam Plastic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thai Nam Plastic has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Erawan and Thai Nam

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

The idea behind The Erawan Group and Thai Nam Plastic 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.