Correlation Between Food Life and Charoen Pokphand
Can any of the company-specific risk be diversified away by investing in both Food Life and Charoen Pokphand 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 Food Life and Charoen Pokphand into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Food Life Companies and Charoen Pokphand Foods, you can compare the effects of market volatilities on Food Life and Charoen Pokphand 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 Food Life with a short position of Charoen Pokphand. Check out your portfolio center. Please also check ongoing floating volatility patterns of Food Life and Charoen Pokphand.
Diversification Opportunities for Food Life and Charoen Pokphand
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Food and Charoen is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Food Life Companies and Charoen Pokphand Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charoen Pokphand Foods and Food Life 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 Food Life Companies are associated (or correlated) with Charoen Pokphand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charoen Pokphand Foods has no effect on the direction of Food Life i.e., Food Life and Charoen Pokphand go up and down completely randomly.
Pair Corralation between Food Life and Charoen Pokphand
Assuming the 90 days horizon Food Life Companies is expected to generate 0.62 times more return on investment than Charoen Pokphand. However, Food Life Companies is 1.6 times less risky than Charoen Pokphand. It trades about 0.23 of its potential returns per unit of risk. Charoen Pokphand Foods is currently generating about -0.07 per unit of risk. If you would invest 1,940 in Food Life Companies on September 25, 2024 and sell it today you would earn a total of 160.00 from holding Food Life Companies or generate 8.25% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Food Life Companies vs. Charoen Pokphand Foods
Performance |
Timeline |
Food Life Companies |
Charoen Pokphand Foods |
Food Life and Charoen Pokphand Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Food Life and Charoen Pokphand
The main advantage of trading using opposite Food Life and Charoen Pokphand positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Food Life position performs unexpectedly, Charoen Pokphand 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 Charoen Pokphand will offset losses from the drop in Charoen Pokphand's long position.Food Life vs. McDonalds | Food Life vs. Starbucks | Food Life vs. Starbucks | Food Life vs. Compass Group PLC |
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Check out your portfolio center.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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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