Correlation Between Hwa Fong and Chumporn Palm

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

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

Diversification Opportunities for Hwa Fong and Chumporn Palm

0.78

Correlation Coefficient

Hwa Fong  Chumporn Palm

Poor diversification

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

Pair Corralation between Hwa Fong and Chumporn Palm

Assuming the 90 days trading horizon Hwa Fong is expected to generate 1.02 times less return on investment than Chumporn Palm. In addition to that, Hwa Fong is 1.0 times more volatile than Chumporn Palm Oil. It trades about 0.13 of its total potential returns per unit of risk. Chumporn Palm Oil is currently generating about 0.13 per unit of volatility. 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

Hwa Fong Rubber  vs.  Chumporn Palm Oil

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.

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.

Pair Trading with Hwa Fong and Chumporn Palm

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

The idea behind Hwa Fong Rubber and Chumporn Palm 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.