Correlation Between Charoen Pokphand and Quality Houses

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

Diversification Opportunities for Charoen Pokphand and Quality Houses

-0.44

Correlation Coefficient

Charoen Pokphand  Quality Houses

Very good diversification

The 3 months correlation between Charoen and Quality is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Charoen Pokphand Foods and Quality Houses Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quality Houses 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 Quality Houses. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quality Houses Public has no effect on the direction of Charoen Pokphand i.e., Charoen Pokphand and Quality Houses go up and down completely randomly.

Pair Corralation between Charoen Pokphand and Quality Houses

Assuming the 90 days trading horizon Charoen Pokphand Foods is expected to generate 2.19 times more return on investment than Quality Houses. However, Charoen Pokphand is 2.19 times more volatile than Quality Houses Public. It trades about 0.04 of its potential returns per unit of risk. Quality Houses Public is currently generating about -0.14 per unit of risk. If you would invest  2,280  in Charoen Pokphand Foods on December 30, 2024 and sell it today you would earn a total of  110.00  from holding Charoen Pokphand Foods or generate 4.82% 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.  Quality Houses Public

Charoen Pokphand Foods

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Charoen Pokphand Foods are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Charoen Pokphand may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Quality Houses Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Quality Houses Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental drivers remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Charoen Pokphand and Quality Houses

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

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