Correlation Between Charoen Pokphand and Australian Agricultural
Can any of the company-specific risk be diversified away by investing in both Charoen Pokphand and Australian Agricultural 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 Australian Agricultural 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 Australian Agricultural, you can compare the effects of market volatilities on Charoen Pokphand and Australian Agricultural 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 Australian Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charoen Pokphand and Australian Agricultural.
Diversification Opportunities for Charoen Pokphand and Australian Agricultural
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Charoen and Australian is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Charoen Pokphand Foods and Australian Agricultural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Agricultural 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 Australian Agricultural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Agricultural has no effect on the direction of Charoen Pokphand i.e., Charoen Pokphand and Australian Agricultural go up and down completely randomly.
Pair Corralation between Charoen Pokphand and Australian Agricultural
Assuming the 90 days trading horizon Charoen Pokphand is expected to generate 1.69 times less return on investment than Australian Agricultural. In addition to that, Charoen Pokphand is 2.03 times more volatile than Australian Agricultural. It trades about 0.01 of its total potential returns per unit of risk. Australian Agricultural is currently generating about 0.05 per unit of volatility. If you would invest 82.00 in Australian Agricultural on November 2, 2024 and sell it today you would earn a total of 1.00 from holding Australian Agricultural or generate 1.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Charoen Pokphand Foods vs. Australian Agricultural
Performance |
| Timeline |
| Charoen Pokphand Foods |
| Australian Agricultural |
Charoen Pokphand and Australian Agricultural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Charoen Pokphand and Australian Agricultural
The main advantage of trading using opposite Charoen Pokphand and Australian Agricultural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charoen Pokphand position performs unexpectedly, Australian Agricultural 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 Australian Agricultural will offset losses from the drop in Australian Agricultural's long position.| Charoen Pokphand vs. Archer Daniels Midland | Charoen Pokphand vs. Tyson Foods | Charoen Pokphand vs. MOWI ASA SPADR | Charoen Pokphand vs. Mowi ASA |
| Australian Agricultural vs. ALEFARM BREWING DK 05 | Australian Agricultural vs. Daito Trust Construction | Australian Agricultural vs. HK Electric Investments | Australian Agricultural vs. TITAN MACHINERY |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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