Correlation Between Charoen Pokphand and Lian Hwa

Can any of the company-specific risk be diversified away by investing in both Charoen Pokphand and Lian Hwa 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 Lian Hwa 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 Lian Hwa Foods, you can compare the effects of market volatilities on Charoen Pokphand and Lian Hwa 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 Lian Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charoen Pokphand and Lian Hwa.

Diversification Opportunities for Charoen Pokphand and Lian Hwa

0.48

Correlation Coefficient

Charoen Pokphand  Lian Hwa

Very weak diversification

The 3 months correlation between Charoen and Lian is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Charoen Pokphand Enterprise and Lian Hwa Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lian Hwa Foods 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 Lian Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lian Hwa Foods has no effect on the direction of Charoen Pokphand i.e., Charoen Pokphand and Lian Hwa go up and down completely randomly.

Pair Corralation between Charoen Pokphand and Lian Hwa

Assuming the 90 days trading horizon Charoen Pokphand is expected to generate 6.9 times less return on investment than Lian Hwa. In addition to that, Charoen Pokphand is 1.01 times more volatile than Lian Hwa Foods. It trades about 0.04 of its total potential returns per unit of risk. Lian Hwa Foods is currently generating about 0.3 per unit of volatility. If you would invest  10,500  in Lian Hwa Foods on September 12, 2024 and sell it today you would earn a total of  2,500  from holding Lian Hwa Foods or generate 23.81% return on investment over 90 days.

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

Charoen Pokphand Enterprise  vs.  Lian Hwa Foods

Charoen Pokphand Ent

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Charoen Pokphand Enterprise are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Charoen Pokphand is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Lian Hwa Foods

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lian Hwa Foods are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Lian Hwa showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Charoen Pokphand and Lian Hwa

The main advantage of trading using opposite Charoen Pokphand and Lian Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Charoen Pokphand position performs unexpectedly, Lian Hwa 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 Lian Hwa will offset losses from the drop in Lian Hwa's long position.

The idea behind Charoen Pokphand Enterprise and Lian Hwa 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.

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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.