Correlation Between PT Charoen and Australian Agricultural

Can any of the company-specific risk be diversified away by investing in both PT Charoen 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 PT Charoen and Australian Agricultural into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PT Charoen Pokphand and Australian Agricultural, you can compare the effects of market volatilities on PT Charoen 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 PT Charoen with a short position of Australian Agricultural. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Charoen and Australian Agricultural.

Diversification Opportunities for PT Charoen and Australian Agricultural

0.17

Correlation Coefficient

PT Charoen  Australian Agricultural

Average diversification

The 3 months correlation between 0CP1 and Australian is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding PT Charoen Pokphand and Australian Agricultural in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Agricultural and PT Charoen 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 PT Charoen Pokphand 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 PT Charoen i.e., PT Charoen and Australian Agricultural go up and down completely randomly.

Pair Corralation between PT Charoen and Australian Agricultural

Assuming the 90 days trading horizon PT Charoen Pokphand is expected to generate 2.58 times more return on investment than Australian Agricultural. However, PT Charoen is 2.58 times more volatile than Australian Agricultural. It trades about 0.01 of its potential returns per unit of risk. Australian Agricultural is currently generating about -0.08 per unit of risk. If you would invest  27.00  in PT Charoen Pokphand on October 15, 2024 and sell it today you would earn a total of  0.00  from holding PT Charoen Pokphand or generate 0.0% return on investment over 90 days.

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

PT Charoen Pokphand  vs.  Australian Agricultural

PT Charoen Pokphand

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Charoen Pokphand has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PT Charoen is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Australian Agricultural

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Australian Agricultural has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Australian Agricultural is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PT Charoen and Australian Agricultural

The main advantage of trading using opposite PT Charoen and Australian Agricultural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Charoen 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.

The idea behind PT Charoen Pokphand and Australian Agricultural 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.