Correlation Between Charoen Pokphand and AIR PRODCHEMICALS

Can any of the company-specific risk be diversified away by investing in both Charoen Pokphand and AIR PRODCHEMICALS 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 AIR PRODCHEMICALS 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 AIR PRODCHEMICALS, you can compare the effects of market volatilities on Charoen Pokphand and AIR PRODCHEMICALS 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 AIR PRODCHEMICALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charoen Pokphand and AIR PRODCHEMICALS.

Diversification Opportunities for Charoen Pokphand and AIR PRODCHEMICALS

0.34

Correlation Coefficient

Charoen Pokphand  AIR PRODCHEMICALS

Weak diversification

The 3 months correlation between Charoen and AIR is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Charoen Pokphand Foods and AIR PRODCHEMICALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIR PRODCHEMICALS 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 AIR PRODCHEMICALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIR PRODCHEMICALS has no effect on the direction of Charoen Pokphand i.e., Charoen Pokphand and AIR PRODCHEMICALS go up and down completely randomly.

Pair Corralation between Charoen Pokphand and AIR PRODCHEMICALS

Assuming the 90 days trading horizon Charoen Pokphand Foods is expected to generate 2.41 times more return on investment than AIR PRODCHEMICALS. However, Charoen Pokphand is 2.41 times more volatile than AIR PRODCHEMICALS. It trades about 0.07 of its potential returns per unit of risk. AIR PRODCHEMICALS is currently generating about 0.09 per unit of risk. If you would invest  64.00  in Charoen Pokphand Foods on September 13, 2024 and sell it today you would earn a total of  2.00  from holding Charoen Pokphand Foods or generate 3.13% 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.  AIR PRODCHEMICALS

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.

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.

Pair Trading with Charoen Pokphand and AIR PRODCHEMICALS

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

The idea behind Charoen Pokphand Foods and AIR PRODCHEMICALS 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.