Correlation Between Charoen Pokphand and President Chain
Can any of the company-specific risk be diversified away by investing in both Charoen Pokphand and President Chain 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 President Chain 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 President Chain Store, you can compare the effects of market volatilities on Charoen Pokphand and President Chain 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 President Chain. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charoen Pokphand and President Chain.
Diversification Opportunities for Charoen Pokphand and President Chain
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Charoen and President is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Charoen Pokphand Enterprise and President Chain Store in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on President Chain Store 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 President Chain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of President Chain Store has no effect on the direction of Charoen Pokphand i.e., Charoen Pokphand and President Chain go up and down completely randomly.
Pair Corralation between Charoen Pokphand and President Chain
Assuming the 90 days trading horizon Charoen Pokphand Enterprise is expected to generate 1.27 times more return on investment than President Chain. However, Charoen Pokphand is 1.27 times more volatile than President Chain Store. It trades about 0.03 of its potential returns per unit of risk. President Chain Store is currently generating about 0.02 per unit of risk. If you would invest 9,080 in Charoen Pokphand Enterprise on August 25, 2024 and sell it today you would earn a total of 760.00 from holding Charoen Pokphand Enterprise or generate 8.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.62% |
| Values | Daily Returns |
Charoen Pokphand Enterprise vs. President Chain Store
Performance |
| Timeline |
| Charoen Pokphand Ent |
| President Chain Store |
Charoen Pokphand and President Chain Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Charoen Pokphand and President Chain
The main advantage of trading using opposite Charoen Pokphand and President Chain positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charoen Pokphand position performs unexpectedly, President Chain 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 President Chain will offset losses from the drop in President Chain's long position.| Charoen Pokphand vs. Great Wall Enterprise | Charoen Pokphand vs. TTET Union Corp | Charoen Pokphand vs. Uni President Enterprises Corp | Charoen Pokphand vs. Lien Hwa Industrial |
| President Chain vs. Lian Hwa Foods | President Chain vs. Uni President Enterprises Corp | President Chain vs. Taiwan Cement Corp | President Chain vs. Ruentex Development Co |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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