Correlation Between PT Charoen and SalMar ASA

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

By analyzing existing cross correlation between PT Charoen Pokphand and SalMar ASA, you can compare the effects of market volatilities on PT Charoen and SalMar ASA 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 PT Charoen with a short position of SalMar ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Charoen and SalMar ASA.

Diversification Opportunities for PT Charoen and SalMar ASA

0.2

Correlation Coefficient

PT Charoen  SalMar ASA

Modest diversification

The 3 months correlation between 0CP1 and SalMar is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding PT Charoen Pokphand and SalMar ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SalMar ASA and PT Charoen 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 PT Charoen Pokphand are associated (or correlated) with SalMar ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SalMar ASA has no effect on the direction of PT Charoen i.e., PT Charoen and SalMar ASA go up and down completely randomly.

Pair Corralation between PT Charoen and SalMar ASA

Assuming the 90 days trading horizon PT Charoen Pokphand is expected to generate 1.82 times more return on investment than SalMar ASA. However, PT Charoen is 1.82 times more volatile than SalMar ASA. It trades about 0.01 of its potential returns per unit of risk. SalMar ASA is currently generating about -0.28 per unit of risk. If you would invest  26.00  in PT Charoen Pokphand on September 23, 2024 and sell it today you would earn a total of  0.00  from holding PT Charoen Pokphand or generate 0.0% return on investment over 90 days.

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

PT Charoen Pokphand  vs.  SalMar ASA

PT Charoen Pokphand

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Charoen Pokphand has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PT Charoen is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

SalMar ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SalMar ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, SalMar ASA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PT Charoen and SalMar ASA

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

The idea behind PT Charoen Pokphand and SalMar ASA 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.