Correlation Between ASIA Capital and Charoen Pokphand

Can any of the company-specific risk be diversified away by investing in both ASIA Capital and Charoen Pokphand 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 ASIA Capital and Charoen Pokphand into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ASIA Capital Group and Charoen Pokphand Foods, you can compare the effects of market volatilities on ASIA Capital and Charoen Pokphand 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 ASIA Capital with a short position of Charoen Pokphand. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASIA Capital and Charoen Pokphand.

Diversification Opportunities for ASIA Capital and Charoen Pokphand

-0.25

Correlation Coefficient

ASIA Capital  Charoen Pokphand

Very good diversification

The 3 months correlation between ASIA and Charoen is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding ASIA Capital Group and Charoen Pokphand Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charoen Pokphand Foods and ASIA Capital 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 ASIA Capital Group are associated (or correlated) with Charoen Pokphand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charoen Pokphand Foods has no effect on the direction of ASIA Capital i.e., ASIA Capital and Charoen Pokphand go up and down completely randomly.

Pair Corralation between ASIA Capital and Charoen Pokphand

Assuming the 90 days trading horizon ASIA Capital Group is expected to generate 108.9 times more return on investment than Charoen Pokphand. However, ASIA Capital is 108.9 times more volatile than Charoen Pokphand Foods. It trades about 0.12 of its potential returns per unit of risk. Charoen Pokphand Foods is currently generating about -0.04 per unit of risk. If you would invest  33.00  in ASIA Capital Group on September 13, 2024 and sell it today you would earn a total of  0.00  from holding ASIA Capital Group or generate 0.0% return on investment over 90 days.

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

ASIA Capital Group  vs.  Charoen Pokphand Foods

ASIA Capital Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ASIA Capital Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, ASIA Capital disclosed solid returns over the last few months and may actually be approaching a breakup point.

Charoen Pokphand Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Charoen Pokphand Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Charoen Pokphand is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ASIA Capital and Charoen Pokphand

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

The idea behind ASIA Capital Group and Charoen Pokphand Foods 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.