Correlation Between Charoen Pokphand and Commonwealth Bank

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

Diversification Opportunities for Charoen Pokphand and Commonwealth Bank

-0.42

Correlation Coefficient

Charoen Pokphand  Commonwealth Bank

Very good diversification

The 3 months correlation between Charoen and Commonwealth is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Charoen Pokphand Foods and Commonwealth Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Bank 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 Commonwealth Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commonwealth Bank has no effect on the direction of Charoen Pokphand i.e., Charoen Pokphand and Commonwealth Bank go up and down completely randomly.

Pair Corralation between Charoen Pokphand and Commonwealth Bank

Assuming the 90 days trading horizon Charoen Pokphand Foods is expected to under-perform the Commonwealth Bank. In addition to that, Charoen Pokphand is 2.14 times more volatile than Commonwealth Bank of. It trades about -0.03 of its total potential returns per unit of risk. Commonwealth Bank of is currently generating about 0.18 per unit of volatility. If you would invest  8,427  in Commonwealth Bank of on October 12, 2024 and sell it today you would earn a total of  1,151  from holding Commonwealth Bank of or generate 13.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Charoen Pokphand Foods  vs.  Commonwealth Bank of

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.

Commonwealth Bank

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Commonwealth Bank of are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Commonwealth Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Charoen Pokphand and Commonwealth Bank

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

The idea behind Charoen Pokphand Foods and Commonwealth Bank of 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.