Correlation Between Charoen Pokphand and Tipco Asphalt

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

Diversification Opportunities for Charoen Pokphand and Tipco Asphalt

-0.28

Correlation Coefficient

Charoen Pokphand  Tipco Asphalt

Very good diversification

The 3 months correlation between Charoen and Tipco is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Charoen Pokphand Foods and Tipco Asphalt Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tipco Asphalt 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 Tipco Asphalt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tipco Asphalt Public has no effect on the direction of Charoen Pokphand i.e., Charoen Pokphand and Tipco Asphalt go up and down completely randomly.

Pair Corralation between Charoen Pokphand and Tipco Asphalt

Assuming the 90 days trading horizon Charoen Pokphand Foods is expected to under-perform the Tipco Asphalt. But the stock apears to be less risky and, when comparing its historical volatility, Charoen Pokphand Foods is 1.19 times less risky than Tipco Asphalt. The stock trades about -0.05 of its potential returns per unit of risk. The Tipco Asphalt Public is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,700  in Tipco Asphalt Public on September 3, 2024 and sell it today you would earn a total of  210.00  from holding Tipco Asphalt Public or generate 12.35% return on investment over 90 days.

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

Charoen Pokphand Foods  vs.  Tipco Asphalt 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 quite persistent technical and fundamental indicators, Charoen Pokphand is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Tipco Asphalt Public

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tipco Asphalt Public are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Tipco Asphalt may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Charoen Pokphand and Tipco Asphalt

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

The idea behind Charoen Pokphand Foods and Tipco Asphalt 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.