Correlation Between Charoen Pokphand and Sports Gear

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

Diversification Opportunities for Charoen Pokphand and Sports Gear

0.27

Correlation Coefficient

Charoen Pokphand  Sports Gear

Modest diversification

The 3 months correlation between Charoen and Sports is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Charoen Pokphand Enterprise and Sports Gear Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sports Gear 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 Sports Gear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sports Gear has no effect on the direction of Charoen Pokphand i.e., Charoen Pokphand and Sports Gear go up and down completely randomly.

Pair Corralation between Charoen Pokphand and Sports Gear

Assuming the 90 days trading horizon Charoen Pokphand Enterprise is expected to generate 0.45 times more return on investment than Sports Gear. However, Charoen Pokphand Enterprise is 2.23 times less risky than Sports Gear. It trades about -0.47 of its potential returns per unit of risk. Sports Gear Co is currently generating about -0.23 per unit of risk. If you would invest  10,050  in Charoen Pokphand Enterprise on October 9, 2024 and sell it today you would lose (850.00) from holding Charoen Pokphand Enterprise or give up 8.46% of portfolio value over 90 days.

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

Charoen Pokphand Enterprise  vs.  Sports Gear 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.

Sports Gear

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Charoen Pokphand and Sports Gear

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

The idea behind Charoen Pokphand Enterprise and Sports Gear 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.