Correlation Between LION ONE and Charoen Pokphand

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

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

Diversification Opportunities for LION ONE and Charoen Pokphand

0.5

Correlation Coefficient

LION ONE  Charoen Pokphand

Very weak diversification

The 3 months correlation between LION and Charoen is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding LION ONE METALS 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 LION ONE 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 LION ONE METALS 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 LION ONE i.e., LION ONE and Charoen Pokphand go up and down completely randomly.

Pair Corralation between LION ONE and Charoen Pokphand

Assuming the 90 days trading horizon LION ONE METALS is expected to under-perform the Charoen Pokphand. In addition to that, LION ONE is 1.43 times more volatile than Charoen Pokphand Foods. It trades about -0.05 of its total potential returns per unit of risk. Charoen Pokphand Foods is currently generating about 0.01 per unit of volatility. If you would invest  65.00  in Charoen Pokphand Foods on September 26, 2024 and sell it today you would lose (3.00) from holding Charoen Pokphand Foods or give up 4.62% of portfolio value over 90 days.

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

LION ONE METALS  vs.  Charoen Pokphand Foods

LION ONE METALS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LION ONE METALS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Charoen Pokphand Foods

Risk-Adjusted Performance

0 of 100

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.

Pair Trading with LION ONE and Charoen Pokphand

The main advantage of trading using opposite LION ONE and Charoen Pokphand positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LION ONE 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 LION ONE METALS 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.