Correlation Between Charoen Pokphand and Forth Smart

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

By analyzing existing cross correlation between Charoen Pokphand Foods and Forth Smart Service, you can compare the effects of market volatilities on Charoen Pokphand and Forth Smart 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 Forth Smart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Charoen Pokphand and Forth Smart.

Diversification Opportunities for Charoen Pokphand and Forth Smart

-0.42

Correlation Coefficient

Charoen Pokphand  Forth Smart

Very good diversification

The 3 months correlation between Charoen and Forth is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Charoen Pokphand Foods and Forth Smart Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forth Smart Service 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 Foods are associated (or correlated) with Forth Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forth Smart Service has no effect on the direction of Charoen Pokphand i.e., Charoen Pokphand and Forth Smart go up and down completely randomly.

Pair Corralation between Charoen Pokphand and Forth Smart

Assuming the 90 days trading horizon Charoen Pokphand is expected to generate 22.95 times less return on investment than Forth Smart. But when comparing it to its historical volatility, Charoen Pokphand Foods is 2.66 times less risky than Forth Smart. It trades about 0.01 of its potential returns per unit of risk. Forth Smart Service is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  511.00  in Forth Smart Service on September 22, 2024 and sell it today you would earn a total of  279.00  from holding Forth Smart Service or generate 54.6% return on investment over 90 days.

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

Charoen Pokphand Foods  vs.  Forth Smart Service

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 current stock price disturbance, may contribute to short-term losses for the investors.

Forth Smart Service

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Forth Smart Service are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Forth Smart sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Charoen Pokphand and Forth Smart

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

The idea behind Charoen Pokphand Foods and Forth Smart Service 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.