Correlation Between KRUNG THAI and Charoen Pokphand
Can any of the company-specific risk be diversified away by investing in both KRUNG THAI and Charoen Pokphand 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 KRUNG THAI and Charoen Pokphand into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KRUNG THAI FGN and Charoen Pokphand Foods, you can compare the effects of market volatilities on KRUNG THAI and Charoen Pokphand 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 KRUNG THAI with a short position of Charoen Pokphand. Check out your portfolio center. Please also check ongoing floating volatility patterns of KRUNG THAI and Charoen Pokphand.
Diversification Opportunities for KRUNG THAI and Charoen Pokphand
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between KRUNG and Charoen is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding KRUNG THAI FGN and Charoen Pokphand Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charoen Pokphand Foods and KRUNG THAI 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 KRUNG THAI FGN are associated (or correlated) with Charoen Pokphand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charoen Pokphand Foods has no effect on the direction of KRUNG THAI i.e., KRUNG THAI and Charoen Pokphand go up and down completely randomly.
Pair Corralation between KRUNG THAI and Charoen Pokphand
Assuming the 90 days trading horizon KRUNG THAI FGN is expected to generate 1.82 times more return on investment than Charoen Pokphand. However, KRUNG THAI is 1.82 times more volatile than Charoen Pokphand Foods. It trades about -0.03 of its potential returns per unit of risk. Charoen Pokphand Foods is currently generating about -0.11 per unit of risk. If you would invest 55.00 in KRUNG THAI FGN on September 1, 2024 and sell it today you would lose (1.00) from holding KRUNG THAI FGN or give up 1.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
KRUNG THAI FGN vs. Charoen Pokphand Foods
Performance |
| Timeline |
| KRUNG THAI FGN |
| Charoen Pokphand Foods |
KRUNG THAI and Charoen Pokphand Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KRUNG THAI and Charoen Pokphand
The main advantage of trading using opposite KRUNG THAI and Charoen Pokphand positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KRUNG THAI position performs unexpectedly, Charoen Pokphand 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 Charoen Pokphand will offset losses from the drop in Charoen Pokphand's long position.The idea behind KRUNG THAI FGN and Charoen Pokphand Foods 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.| Charoen Pokphand vs. Charoen Pokphand Foods | Charoen Pokphand vs. KRUNG THAI FGN | Charoen Pokphand vs. PT Gudang Garam | Charoen Pokphand vs. TMBThanachart Bank Public |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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