Correlation Between Charoen Pokphand and SalMar ASA

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

Diversification Opportunities for Charoen Pokphand and SalMar ASA

0.02

Correlation Coefficient

Charoen Pokphand  SalMar ASA

Significant diversification

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

Pair Corralation between Charoen Pokphand and SalMar ASA

Assuming the 90 days trading horizon Charoen Pokphand Foods is expected to generate 1.43 times more return on investment than SalMar ASA. However, Charoen Pokphand is 1.43 times more volatile than SalMar ASA. It trades about 0.07 of its potential returns per unit of risk. SalMar ASA is currently generating about -0.03 per unit of risk. If you would invest  43.00  in Charoen Pokphand Foods on December 11, 2024 and sell it today you would earn a total of  20.00  from holding Charoen Pokphand Foods or generate 46.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.63%
Values	Daily Returns

Charoen Pokphand Foods  vs.  SalMar ASA

Charoen Pokphand Foods

Risk-Adjusted Performance

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 nearly stable basic indicators, Charoen Pokphand is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

SalMar ASA

Risk-Adjusted Performance

Very Weak

Over the last 90 days SalMar ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Charoen Pokphand and SalMar ASA

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

The idea behind Charoen Pokphand Foods and SalMar ASA 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.