Correlation Between Charoen Pokphand and MELIA HOTELS

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

Diversification Opportunities for Charoen Pokphand and MELIA HOTELS

-0.25

Correlation Coefficient

Charoen Pokphand  MELIA HOTELS

Very good diversification

The 3 months correlation between Charoen and MELIA is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Charoen Pokphand Foods and MELIA HOTELS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MELIA HOTELS 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 MELIA HOTELS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MELIA HOTELS has no effect on the direction of Charoen Pokphand i.e., Charoen Pokphand and MELIA HOTELS go up and down completely randomly.

Pair Corralation between Charoen Pokphand and MELIA HOTELS

Assuming the 90 days trading horizon Charoen Pokphand Foods is expected to under-perform the MELIA HOTELS. In addition to that, Charoen Pokphand is 1.33 times more volatile than MELIA HOTELS. It trades about -0.01 of its total potential returns per unit of risk. MELIA HOTELS is currently generating about 0.12 per unit of volatility. If you would invest  642.00  in MELIA HOTELS on September 23, 2024 and sell it today you would earn a total of  86.00  from holding MELIA HOTELS or generate 13.4% return on investment over 90 days.

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

Charoen Pokphand Foods  vs.  MELIA HOTELS

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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

MELIA HOTELS

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MELIA HOTELS are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, MELIA HOTELS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Charoen Pokphand and MELIA HOTELS

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

The idea behind Charoen Pokphand Foods and MELIA HOTELS 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.