Correlation Between Charoen Pokphand and II Group

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

Diversification Opportunities for Charoen Pokphand and II Group

0.78

Correlation Coefficient

Charoen Pokphand  II Group

Poor diversification

The 3 months correlation between Charoen and IIG is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Charoen Pokphand Foods and II Group Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on II Group Public 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 II Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of II Group Public has no effect on the direction of Charoen Pokphand i.e., Charoen Pokphand and II Group go up and down completely randomly.

Pair Corralation between Charoen Pokphand and II Group

Assuming the 90 days trading horizon Charoen Pokphand Foods is expected to generate 0.39 times more return on investment than II Group. However, Charoen Pokphand Foods is 2.56 times less risky than II Group. It trades about -0.12 of its potential returns per unit of risk. II Group Public is currently generating about -0.41 per unit of risk. If you would invest  2,410  in Charoen Pokphand Foods on October 5, 2024 and sell it today you would lose (110.00) from holding Charoen Pokphand Foods or give up 4.56% of portfolio value over 90 days.

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

Charoen Pokphand Foods  vs.  II Group Public

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 latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

II Group Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days II Group Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Charoen Pokphand and II Group

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

The idea behind Charoen Pokphand Foods and II Group Public 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.