Correlation Between Charoen Pokphand and Posiflex Technology

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

Diversification Opportunities for Charoen Pokphand and Posiflex Technology

-0.28

Correlation Coefficient

Charoen Pokphand  Posiflex Technology

Very good diversification

The 3 months correlation between Charoen and Posiflex is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Charoen Pokphand Enterprise and Posiflex Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Posiflex Technology 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 Posiflex Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Posiflex Technology has no effect on the direction of Charoen Pokphand i.e., Charoen Pokphand and Posiflex Technology go up and down completely randomly.

Pair Corralation between Charoen Pokphand and Posiflex Technology

Assuming the 90 days trading horizon Charoen Pokphand Enterprise is expected to under-perform the Posiflex Technology. But the stock apears to be less risky and, when comparing its historical volatility, Charoen Pokphand Enterprise is 2.37 times less risky than Posiflex Technology. The stock trades about -0.44 of its potential returns per unit of risk. The Posiflex Technology is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  32,100  in Posiflex Technology on October 4, 2024 and sell it today you would earn a total of  3,350  from holding Posiflex Technology or generate 10.44% 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.  Posiflex Technology

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.

Posiflex Technology

Risk-Adjusted Performance

24 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Posiflex Technology are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Posiflex Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Charoen Pokphand and Posiflex Technology

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

The idea behind Charoen Pokphand Enterprise and Posiflex Technology 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.