Correlation Between Charoen Pokphand and Farcent Enterprise

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

Diversification Opportunities for Charoen Pokphand and Farcent Enterprise

-0.31

Correlation Coefficient

Charoen Pokphand  Farcent Enterprise

Very good diversification

The 3 months correlation between Charoen and Farcent is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Charoen Pokphand Enterprise and Farcent Enterprise Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farcent Enterprise 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 Farcent Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farcent Enterprise has no effect on the direction of Charoen Pokphand i.e., Charoen Pokphand and Farcent Enterprise go up and down completely randomly.

Pair Corralation between Charoen Pokphand and Farcent Enterprise

Assuming the 90 days trading horizon Charoen Pokphand Enterprise is expected to under-perform the Farcent Enterprise. In addition to that, Charoen Pokphand is 1.36 times more volatile than Farcent Enterprise Co. It trades about -0.4 of its total potential returns per unit of risk. Farcent Enterprise Co is currently generating about 0.02 per unit of volatility. If you would invest  5,380  in Farcent Enterprise Co on October 11, 2024 and sell it today you would earn a total of  10.00  from holding Farcent Enterprise Co or generate 0.19% return on investment over 90 days.

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

Charoen Pokphand Enterprise  vs.  Farcent Enterprise Co

Charoen Pokphand Ent

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Charoen Pokphand Enterprise has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Farcent Enterprise

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Farcent Enterprise Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Farcent Enterprise is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Charoen Pokphand and Farcent Enterprise

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

The idea behind Charoen Pokphand Enterprise and Farcent Enterprise Co 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.