Correlation Between Charoen Pokphand and Ko Ja

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

Diversification Opportunities for Charoen Pokphand and Ko Ja

0.46

Correlation Coefficient

Charoen Pokphand  Ko Ja

Very weak diversification

The 3 months correlation between Charoen and 5215 is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Charoen Pokphand Enterprise and Ko Ja Cayman in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ko Ja Cayman 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 Ko Ja. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ko Ja Cayman has no effect on the direction of Charoen Pokphand i.e., Charoen Pokphand and Ko Ja go up and down completely randomly.

Pair Corralation between Charoen Pokphand and Ko Ja

Assuming the 90 days trading horizon Charoen Pokphand Enterprise is expected to generate 0.94 times more return on investment than Ko Ja. However, Charoen Pokphand Enterprise is 1.07 times less risky than Ko Ja. It trades about -0.12 of its potential returns per unit of risk. Ko Ja Cayman is currently generating about -0.13 per unit of risk. If you would invest  9,900  in Charoen Pokphand Enterprise on October 5, 2024 and sell it today you would lose (750.00) from holding Charoen Pokphand Enterprise or give up 7.58% of portfolio value over 90 days.

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

Charoen Pokphand Enterprise  vs.  Ko Ja Cayman

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.

Ko Ja Cayman

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ko Ja Cayman 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.

Pair Trading with Charoen Pokphand and Ko Ja

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

The idea behind Charoen Pokphand Enterprise and Ko Ja Cayman 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.

Check out your portfolio center.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.