Correlation Between Charoen Pokphand and TT Electronics

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

Diversification Opportunities for Charoen Pokphand and TT Electronics

-0.31

Correlation Coefficient

Charoen Pokphand  TT Electronics

Very good diversification

The 3 months correlation between Charoen and 7TT is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Charoen Pokphand Foods and TT Electronics PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TT Electronics PLC 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 TT Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TT Electronics PLC has no effect on the direction of Charoen Pokphand i.e., Charoen Pokphand and TT Electronics go up and down completely randomly.

Pair Corralation between Charoen Pokphand and TT Electronics

Assuming the 90 days trading horizon Charoen Pokphand Foods is expected to generate 1.01 times more return on investment than TT Electronics. However, Charoen Pokphand is 1.01 times more volatile than TT Electronics PLC. It trades about 0.01 of its potential returns per unit of risk. TT Electronics PLC is currently generating about -0.01 per unit of risk. If you would invest  65.00  in Charoen Pokphand Foods on October 13, 2024 and sell it today you would lose (5.00) from holding Charoen Pokphand Foods or give up 7.69% of portfolio value over 90 days.

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

Charoen Pokphand Foods  vs.  TT Electronics PLC

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 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.

TT Electronics PLC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TT Electronics PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, TT Electronics may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Charoen Pokphand and TT Electronics

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

The idea behind Charoen Pokphand Foods and TT Electronics PLC 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.