Correlation Between Chumporn Palm and Thai Vegetable

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

Diversification Opportunities for Chumporn Palm and Thai Vegetable

0.56

Correlation Coefficient

Chumporn Palm  Thai Vegetable

Very weak diversification

The 3 months correlation between Chumporn and Thai is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Chumporn Palm Oil and Thai Vegetable Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Vegetable Oil 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 Thai Vegetable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Vegetable Oil has no effect on the direction of Chumporn Palm i.e., Chumporn Palm and Thai Vegetable go up and down completely randomly.

Pair Corralation between Chumporn Palm and Thai Vegetable

Assuming the 90 days trading horizon Chumporn Palm Oil is expected to generate 0.93 times more return on investment than Thai Vegetable. However, Chumporn Palm Oil is 1.08 times less risky than Thai Vegetable. It trades about 0.05 of its potential returns per unit of risk. Thai Vegetable Oil is currently generating about -0.01 per unit of risk. If you would invest  268.00  in Chumporn Palm Oil on December 29, 2024 and sell it today you would earn a total of  8.00  from holding Chumporn Palm Oil or generate 2.99% return on investment over 90 days.

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

Chumporn Palm Oil  vs.  Thai Vegetable Oil

Chumporn Palm Oil

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chumporn Palm Oil are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward indicators, Chumporn Palm is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Thai Vegetable Oil

Risk-Adjusted Performance

Very Weak

Over the last 90 days Thai Vegetable Oil has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Thai Vegetable is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Chumporn Palm and Thai Vegetable

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

The idea behind Chumporn Palm Oil and Thai Vegetable Oil 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.