Correlation Between Charoen Pokphand and Associated British

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

Diversification Opportunities for Charoen Pokphand and Associated British

0.43

Correlation Coefficient

Charoen Pokphand  Associated British

Very weak diversification

The 3 months correlation between Charoen and Associated is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Charoen Pokphand Foods and Associated British Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated British Foods 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 Associated British. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated British Foods has no effect on the direction of Charoen Pokphand i.e., Charoen Pokphand and Associated British go up and down completely randomly.

Pair Corralation between Charoen Pokphand and Associated British

Assuming the 90 days trading horizon Charoen Pokphand is expected to generate 1.89 times less return on investment than Associated British. In addition to that, Charoen Pokphand is 1.52 times more volatile than Associated British Foods. It trades about 0.02 of its total potential returns per unit of risk. Associated British Foods is currently generating about 0.06 per unit of volatility. If you would invest  2,570  in Associated British Foods on September 14, 2024 and sell it today you would earn a total of  135.00  from holding Associated British Foods or generate 5.25% return on investment over 90 days.

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

Charoen Pokphand Foods  vs.  Associated British Foods

Charoen Pokphand Foods

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Charoen Pokphand Foods are ranked lower than 1 (%) 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.

Associated British Foods

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Associated British Foods are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Associated British is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Charoen Pokphand and Associated British

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

The idea behind Charoen Pokphand Foods and Associated British 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.