Correlation Between Charoen Pokphand and SalMar ASA

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

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

Diversification Opportunities for Charoen Pokphand and SalMar ASA

0.32

Correlation Coefficient

Charoen Pokphand  SalMar ASA

Weak diversification

The 3 months correlation between Charoen and SalMar is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Charoen Pokphand Foods and SalMar ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SalMar ASA and Charoen Pokphand 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 Charoen Pokphand Foods 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 Charoen Pokphand i.e., Charoen Pokphand and SalMar ASA go up and down completely randomly.

Pair Corralation between Charoen Pokphand and SalMar ASA

Assuming the 90 days trading horizon Charoen Pokphand is expected to generate 8.08 times less return on investment than SalMar ASA. But when comparing it to its historical volatility, Charoen Pokphand Foods is 1.0 times less risky than SalMar ASA. It trades about 0.01 of its potential returns per unit of risk. SalMar ASA is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4,648  in SalMar ASA on September 3, 2024 and sell it today you would earn a total of  292.00  from holding SalMar ASA or generate 6.28% return on investment over 90 days.

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

Charoen Pokphand Foods  vs.  SalMar ASA

Charoen Pokphand Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Charoen Pokphand Foods has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

SalMar ASA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SalMar ASA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SalMar ASA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Charoen Pokphand and SalMar ASA

The main advantage of trading using opposite Charoen Pokphand and SalMar ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charoen Pokphand 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 Charoen Pokphand Foods 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.