Correlation Between Charoen Pokphand and Carnegie Clean

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

Diversification Opportunities for Charoen Pokphand and Carnegie Clean

-0.19

Correlation Coefficient

Charoen Pokphand  Carnegie Clean

Good diversification

The 3 months correlation between Charoen and Carnegie is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Charoen Pokphand Foods and Carnegie Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carnegie Clean Energy 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 Carnegie Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carnegie Clean Energy has no effect on the direction of Charoen Pokphand i.e., Charoen Pokphand and Carnegie Clean go up and down completely randomly.

Pair Corralation between Charoen Pokphand and Carnegie Clean

Assuming the 90 days trading horizon Charoen Pokphand Foods is expected to under-perform the Carnegie Clean. In addition to that, Charoen Pokphand is 1.19 times more volatile than Carnegie Clean Energy. It trades about -0.09 of its total potential returns per unit of risk. Carnegie Clean Energy is currently generating about -0.01 per unit of volatility. If you would invest  2.22  in Carnegie Clean Energy on September 22, 2024 and sell it today you would lose (0.02) from holding Carnegie Clean Energy or give up 0.9% 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.  Carnegie Clean Energy

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.

Carnegie Clean Energy

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Carnegie Clean Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Carnegie Clean may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Charoen Pokphand and Carnegie Clean

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

The idea behind Charoen Pokphand Foods and Carnegie Clean Energy 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.