Correlation Between Charoen Pokphand and Realtek Semiconductor

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

Diversification Opportunities for Charoen Pokphand and Realtek Semiconductor

-0.64

Correlation Coefficient

Charoen Pokphand  Realtek Semiconductor

Excellent diversification

The 3 months correlation between Charoen and Realtek is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Charoen Pokphand Enterprise and Realtek Semiconductor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Realtek Semiconductor 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 Realtek Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Realtek Semiconductor has no effect on the direction of Charoen Pokphand i.e., Charoen Pokphand and Realtek Semiconductor go up and down completely randomly.

Pair Corralation between Charoen Pokphand and Realtek Semiconductor

Assuming the 90 days trading horizon Charoen Pokphand Enterprise is expected to under-perform the Realtek Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, Charoen Pokphand Enterprise is 2.03 times less risky than Realtek Semiconductor. The stock trades about -0.44 of its potential returns per unit of risk. The Realtek Semiconductor Corp is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  49,000  in Realtek Semiconductor Corp on October 4, 2024 and sell it today you would earn a total of  5,500  from holding Realtek Semiconductor Corp or generate 11.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Charoen Pokphand Enterprise  vs.  Realtek Semiconductor Corp

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 current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Realtek Semiconductor

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Realtek Semiconductor Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Realtek Semiconductor showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Charoen Pokphand and Realtek Semiconductor

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

The idea behind Charoen Pokphand Enterprise and Realtek Semiconductor Corp 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.