Correlation Between Chumporn Palm and Hwa Fong

Can any of the company-specific risk be diversified away by investing in both Chumporn Palm and Hwa Fong 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 Hwa Fong 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 Hwa Fong Rubber, you can compare the effects of market volatilities on Chumporn Palm and Hwa Fong 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 Hwa Fong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chumporn Palm and Hwa Fong.

Diversification Opportunities for Chumporn Palm and Hwa Fong

0.78

Correlation Coefficient

Chumporn Palm  Hwa Fong

Poor diversification

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

Pair Corralation between Chumporn Palm and Hwa Fong

Assuming the 90 days trading horizon Chumporn Palm Oil is expected to generate 1.0 times more return on investment than Hwa Fong. However, Chumporn Palm Oil is 1.0 times less risky than Hwa Fong. It trades about 0.13 of its potential returns per unit of risk. Hwa Fong Rubber is currently generating about 0.13 per unit of risk. If you would invest  0.00  in Chumporn Palm Oil on September 3, 2024 and sell it today you would earn a total of  290.00  from holding Chumporn Palm Oil or generate 9.223372036854776E16% return on investment over 90 days.

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

Chumporn Palm Oil  vs.  Hwa Fong Rubber

Chumporn Palm Oil

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chumporn Palm Oil are ranked lower than 10 (%) 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.

Hwa Fong Rubber

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hwa Fong Rubber are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Hwa Fong disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chumporn Palm and Hwa Fong

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

The idea behind Chumporn Palm Oil and Hwa Fong Rubber 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.