Correlation Between Charoen Pokphand and Fwusow Industry
Can any of the company-specific risk be diversified away by investing in both Charoen Pokphand and Fwusow Industry 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 Fwusow Industry into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Charoen Pokphand Enterprise and Fwusow Industry Co, you can compare the effects of market volatilities on Charoen Pokphand and Fwusow Industry 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 Fwusow Industry. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charoen Pokphand and Fwusow Industry.
Diversification Opportunities for Charoen Pokphand and Fwusow Industry
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Charoen and Fwusow is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Charoen Pokphand Enterprise and Fwusow Industry Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fwusow Industry 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 Enterprise are associated (or correlated) with Fwusow Industry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fwusow Industry has no effect on the direction of Charoen Pokphand i.e., Charoen Pokphand and Fwusow Industry go up and down completely randomly.
Pair Corralation between Charoen Pokphand and Fwusow Industry
Assuming the 90 days trading horizon Charoen Pokphand Enterprise is expected to generate 0.42 times more return on investment than Fwusow Industry. However, Charoen Pokphand Enterprise is 2.38 times less risky than Fwusow Industry. It trades about 0.15 of its potential returns per unit of risk. Fwusow Industry Co is currently generating about -0.2 per unit of risk. If you would invest 9,150 in Charoen Pokphand Enterprise on November 2, 2024 and sell it today you would earn a total of 130.00 from holding Charoen Pokphand Enterprise or generate 1.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Charoen Pokphand Enterprise vs. Fwusow Industry Co
Performance |
| Timeline |
| Charoen Pokphand Ent |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Fwusow Industry |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Charoen Pokphand and Fwusow Industry Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Charoen Pokphand and Fwusow Industry
The main advantage of trading using opposite Charoen Pokphand and Fwusow Industry positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charoen Pokphand position performs unexpectedly, Fwusow Industry 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 Fwusow Industry will offset losses from the drop in Fwusow Industry's long position.The idea behind Charoen Pokphand Enterprise and Fwusow Industry Co 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.Check out your portfolio center.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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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