Correlation Between Archer Daniels and Charoen Pokphand

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

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

Diversification Opportunities for Archer Daniels and Charoen Pokphand

0.12

Correlation Coefficient

Archer Daniels  Charoen Pokphand

Average diversification

The 3 months correlation between Archer and Charoen is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Archer Daniels Midland 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 Archer Daniels 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 Archer Daniels Midland 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 Archer Daniels i.e., Archer Daniels and Charoen Pokphand go up and down completely randomly.

Pair Corralation between Archer Daniels and Charoen Pokphand

Assuming the 90 days horizon Archer Daniels Midland is expected to under-perform the Charoen Pokphand. But the stock apears to be less risky and, when comparing its historical volatility, Archer Daniels Midland is 1.97 times less risky than Charoen Pokphand. The stock trades about -0.2 of its potential returns per unit of risk. The Charoen Pokphand Foods is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  65.00  in Charoen Pokphand Foods on September 22, 2024 and sell it today you would lose (4.00) from holding Charoen Pokphand Foods or give up 6.15% of portfolio value over 90 days.

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

Archer Daniels Midland  vs.  Charoen Pokphand Foods

Archer Daniels Midland

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Archer Daniels Midland has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 nearly stable basic indicators, Charoen Pokphand is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Archer Daniels and Charoen Pokphand

The main advantage of trading using opposite Archer Daniels and Charoen Pokphand positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Archer Daniels 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 Archer Daniels Midland 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.