Correlation Between Charoen Pokphand and Elan Microelectronics

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

Diversification Opportunities for Charoen Pokphand and Elan Microelectronics

-0.14

Correlation Coefficient

Charoen Pokphand  Elan Microelectronics

Good diversification

The 3 months correlation between Charoen and Elan is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Charoen Pokphand Enterprise and Elan Microelectronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elan Microelectronics 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 Elan Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elan Microelectronics has no effect on the direction of Charoen Pokphand i.e., Charoen Pokphand and Elan Microelectronics go up and down completely randomly.

Pair Corralation between Charoen Pokphand and Elan Microelectronics

Assuming the 90 days trading horizon Charoen Pokphand is expected to generate 2.86 times less return on investment than Elan Microelectronics. But when comparing it to its historical volatility, Charoen Pokphand Enterprise is 1.69 times less risky than Elan Microelectronics. It trades about 0.03 of its potential returns per unit of risk. Elan Microelectronics Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  9,883  in Elan Microelectronics Corp on October 5, 2024 and sell it today you would earn a total of  5,317  from holding Elan Microelectronics Corp or generate 53.8% 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.  Elan Microelectronics 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 latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Elan Microelectronics

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Elan Microelectronics Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Elan Microelectronics 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 Elan Microelectronics

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

The idea behind Charoen Pokphand Enterprise and Elan Microelectronics 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.