Correlation Between Charoen Pokphand and Thai Coating

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

Diversification Opportunities for Charoen Pokphand and Thai Coating

0.07

Correlation Coefficient

Charoen Pokphand  Thai Coating

Significant diversification

The 3 months correlation between Charoen and Thai is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Charoen Pokphand Foods and Thai Coating Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Coating Industrial 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 Thai Coating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Coating Industrial has no effect on the direction of Charoen Pokphand i.e., Charoen Pokphand and Thai Coating go up and down completely randomly.

Pair Corralation between Charoen Pokphand and Thai Coating

Assuming the 90 days trading horizon Charoen Pokphand Foods is expected to generate 0.94 times more return on investment than Thai Coating. However, Charoen Pokphand Foods is 1.06 times less risky than Thai Coating. It trades about 0.14 of its potential returns per unit of risk. Thai Coating Industrial is currently generating about -0.05 per unit of risk. If you would invest  2,200  in Charoen Pokphand Foods on December 2, 2024 and sell it today you would earn a total of  200.00  from holding Charoen Pokphand Foods or generate 9.09% return on investment over 90 days.

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

Charoen Pokphand Foods  vs.  Thai Coating Industrial

Charoen Pokphand Foods

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Charoen Pokphand Foods are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Thai Coating Industrial

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Charoen Pokphand and Thai Coating

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

The idea behind Charoen Pokphand Foods and Thai Coating Industrial 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.