Correlation Between Italian Thai and Erawan

Can any of the company-specific risk be diversified away by investing in both Italian Thai and Erawan 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 Italian Thai and Erawan into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Italian Thai Development Public and The Erawan Group, you can compare the effects of market volatilities on Italian Thai and Erawan 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 Italian Thai with a short position of Erawan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Italian Thai and Erawan.

Diversification Opportunities for Italian Thai and Erawan

0.35

Correlation Coefficient

Italian Thai  Erawan

Weak diversification

The 3 months correlation between Italian and Erawan is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Italian Thai Development Publi and The Erawan Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erawan Group and Italian Thai 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 Italian Thai Development Public are associated (or correlated) with Erawan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erawan Group has no effect on the direction of Italian Thai i.e., Italian Thai and Erawan go up and down completely randomly.

Pair Corralation between Italian Thai and Erawan

Assuming the 90 days trading horizon Italian Thai Development Public is expected to under-perform the Erawan. In addition to that, Italian Thai is 1.45 times more volatile than The Erawan Group. It trades about -0.12 of its total potential returns per unit of risk. The Erawan Group is currently generating about 0.02 per unit of volatility. If you would invest  394.00  in The Erawan Group on September 14, 2024 and sell it today you would earn a total of  6.00  from holding The Erawan Group or generate 1.52% return on investment over 90 days.

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

Italian Thai Development Publi  vs.  The Erawan Group

Italian Thai Develop

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Italian Thai Development Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Erawan Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Erawan Group are ranked lower than 1 (%) 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 current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Italian Thai and Erawan

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

The idea behind Italian Thai Development Public and The Erawan Group 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .