Correlation Between Chumporn Palm and Chiangmai Frozen

Can any of the company-specific risk be diversified away by investing in both Chumporn Palm and Chiangmai Frozen 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 Chumporn Palm and Chiangmai Frozen into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chumporn Palm Oil and Chiangmai Frozen Foods, you can compare the effects of market volatilities on Chumporn Palm and Chiangmai Frozen 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 Chumporn Palm with a short position of Chiangmai Frozen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chumporn Palm and Chiangmai Frozen.

Diversification Opportunities for Chumporn Palm and Chiangmai Frozen

-0.02

Correlation Coefficient

Chumporn Palm  Chiangmai Frozen

Good diversification

The 3 months correlation between Chumporn and Chiangmai is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Chumporn Palm Oil and Chiangmai Frozen Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chiangmai Frozen Foods and Chumporn Palm 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 Chumporn Palm Oil are associated (or correlated) with Chiangmai Frozen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chiangmai Frozen Foods has no effect on the direction of Chumporn Palm i.e., Chumporn Palm and Chiangmai Frozen go up and down completely randomly.

Pair Corralation between Chumporn Palm and Chiangmai Frozen

Assuming the 90 days trading horizon Chumporn Palm Oil is expected to generate 1.88 times more return on investment than Chiangmai Frozen. However, Chumporn Palm is 1.88 times more volatile than Chiangmai Frozen Foods. It trades about 0.1 of its potential returns per unit of risk. Chiangmai Frozen Foods is currently generating about -0.15 per unit of risk. If you would invest  250.00  in Chumporn Palm Oil on September 4, 2024 and sell it today you would earn a total of  34.00  from holding Chumporn Palm Oil or generate 13.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Chumporn Palm Oil  vs.  Chiangmai Frozen Foods

Chumporn Palm Oil

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chumporn Palm Oil are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward indicators, Chumporn Palm disclosed solid returns over the last few months and may actually be approaching a breakup point.

Chiangmai Frozen Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chiangmai Frozen Foods 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 Chumporn Palm and Chiangmai Frozen

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

The idea behind Chumporn Palm Oil and Chiangmai Frozen Foods 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.