Correlation Between Chaoda Modern and PT Charoen

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

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

Diversification Opportunities for Chaoda Modern and PT Charoen

-0.09

Correlation Coefficient

Chaoda Modern  PT Charoen

Good diversification

The 3 months correlation between Chaoda and 0CP1 is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Chaoda Modern Agriculture and PT Charoen Pokphand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Charoen Pokphand and Chaoda Modern 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 Chaoda Modern Agriculture are associated (or correlated) with PT Charoen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Charoen Pokphand has no effect on the direction of Chaoda Modern i.e., Chaoda Modern and PT Charoen go up and down completely randomly.

Pair Corralation between Chaoda Modern and PT Charoen

Assuming the 90 days horizon Chaoda Modern Agriculture is expected to generate 8.39 times more return on investment than PT Charoen. However, Chaoda Modern is 8.39 times more volatile than PT Charoen Pokphand. It trades about 0.1 of its potential returns per unit of risk. PT Charoen Pokphand is currently generating about 0.01 per unit of risk. If you would invest  3.00  in Chaoda Modern Agriculture on September 28, 2024 and sell it today you would lose (1.00) from holding Chaoda Modern Agriculture or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Chaoda Modern Agriculture  vs.  PT Charoen Pokphand

Chaoda Modern Agriculture

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chaoda Modern Agriculture are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Chaoda Modern reported solid returns over the last few months and may actually be approaching a breakup point.

PT Charoen Pokphand

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PT Charoen Pokphand are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Chaoda Modern and PT Charoen

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

The idea behind Chaoda Modern Agriculture and PT Charoen Pokphand 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.