Correlation Between Vale Indonesia and Charoen Pokphand

Can any of the company-specific risk be diversified away by investing in both Vale Indonesia and Charoen Pokphand 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 Vale Indonesia and Charoen Pokphand into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vale Indonesia Tbk and Charoen Pokphand Indonesia, you can compare the effects of market volatilities on Vale Indonesia and Charoen Pokphand 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 Vale Indonesia with a short position of Charoen Pokphand. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale Indonesia and Charoen Pokphand.

Diversification Opportunities for Vale Indonesia and Charoen Pokphand

0.67

Correlation Coefficient

Vale Indonesia  Charoen Pokphand

Poor diversification

The 3 months correlation between Vale and Charoen is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Vale Indonesia Tbk and Charoen Pokphand Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charoen Pokphand Ind and Vale Indonesia 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 Vale Indonesia Tbk are associated (or correlated) with Charoen Pokphand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charoen Pokphand Ind has no effect on the direction of Vale Indonesia i.e., Vale Indonesia and Charoen Pokphand go up and down completely randomly.

Pair Corralation between Vale Indonesia and Charoen Pokphand

Assuming the 90 days trading horizon Vale Indonesia Tbk is expected to under-perform the Charoen Pokphand. In addition to that, Vale Indonesia is 1.29 times more volatile than Charoen Pokphand Indonesia. It trades about -0.19 of its total potential returns per unit of risk. Charoen Pokphand Indonesia is currently generating about -0.03 per unit of volatility. If you would invest  476,000  in Charoen Pokphand Indonesia on December 30, 2024 and sell it today you would lose (37,000) from holding Charoen Pokphand Indonesia or give up 7.77% of portfolio value over 90 days.

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

Vale Indonesia Tbk  vs.  Charoen Pokphand Indonesia

Vale Indonesia Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vale Indonesia Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Charoen Pokphand Ind

Risk-Adjusted Performance

Very Weak

Over the last 90 days Charoen Pokphand Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Charoen Pokphand 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 Vale Indonesia and Charoen Pokphand

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

The idea behind Vale Indonesia Tbk and Charoen Pokphand Indonesia 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 Stocks Directory module to find actively traded stocks across global markets.