Correlation Between PT Indofood and Charoen Pokphand

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

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

Diversification Opportunities for PT Indofood and Charoen Pokphand

-0.59

Correlation Coefficient

PT Indofood  Charoen Pokphand

Excellent diversification

The 3 months correlation between ISM and Charoen is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding PT Indofood Sukses and Charoen Pokphand Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charoen Pokphand Foods and PT Indofood 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 PT Indofood Sukses 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 Foods has no effect on the direction of PT Indofood i.e., PT Indofood and Charoen Pokphand go up and down completely randomly.

Pair Corralation between PT Indofood and Charoen Pokphand

Assuming the 90 days horizon PT Indofood Sukses is expected to under-perform the Charoen Pokphand. In addition to that, PT Indofood is 1.57 times more volatile than Charoen Pokphand Foods. It trades about -0.03 of its total potential returns per unit of risk. Charoen Pokphand Foods is currently generating about 0.03 per unit of volatility. If you would invest  63.00  in Charoen Pokphand Foods on December 28, 2024 and sell it today you would earn a total of  2.00  from holding Charoen Pokphand Foods or generate 3.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

PT Indofood Sukses  vs.  Charoen Pokphand Foods

PT Indofood Sukses

Risk-Adjusted Performance

Very Weak

Over the last 90 days PT Indofood Sukses 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.

Charoen Pokphand Foods

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Charoen Pokphand Foods are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Charoen Pokphand is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PT Indofood and Charoen Pokphand

The main advantage of trading using opposite PT Indofood and Charoen Pokphand positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Indofood 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 PT Indofood Sukses and Charoen Pokphand Foods 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.