Correlation Between AIR PRODCHEMICALS and Charoen Pokphand

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

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

Diversification Opportunities for AIR PRODCHEMICALS and Charoen Pokphand

0.34

Correlation Coefficient

AIR PRODCHEMICALS  Charoen Pokphand

Weak diversification

The 3 months correlation between AIR and Charoen is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding AIR PRODCHEMICALS 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 AIR PRODCHEMICALS 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 AIR PRODCHEMICALS 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 AIR PRODCHEMICALS i.e., AIR PRODCHEMICALS and Charoen Pokphand go up and down completely randomly.

Pair Corralation between AIR PRODCHEMICALS and Charoen Pokphand

Assuming the 90 days trading horizon AIR PRODCHEMICALS is expected to generate 0.68 times more return on investment than Charoen Pokphand. However, AIR PRODCHEMICALS is 1.46 times less risky than Charoen Pokphand. It trades about 0.18 of its potential returns per unit of risk. Charoen Pokphand Foods is currently generating about 0.03 per unit of risk. If you would invest  25,550  in AIR PRODCHEMICALS on September 13, 2024 and sell it today you would earn a total of  4,480  from holding AIR PRODCHEMICALS or generate 17.53% return on investment over 90 days.

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

AIR PRODCHEMICALS  vs.  Charoen Pokphand Foods

AIR PRODCHEMICALS

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AIR PRODCHEMICALS are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, AIR PRODCHEMICALS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Charoen Pokphand Foods

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Charoen Pokphand Foods are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Charoen Pokphand is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AIR PRODCHEMICALS and Charoen Pokphand

The main advantage of trading using opposite AIR PRODCHEMICALS and Charoen Pokphand positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AIR PRODCHEMICALS 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.

The idea behind AIR PRODCHEMICALS and Charoen Pokphand Foods 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.