Correlation Between Charoen Pokphand and PT Gudang

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

Diversification Opportunities for Charoen Pokphand and PT Gudang

-0.01

Correlation Coefficient

Charoen Pokphand  PT Gudang

Good diversification

The 3 months correlation between Charoen and GGG is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Charoen Pokphand Foods and PT Gudang Garam in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Gudang Garam 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 PT Gudang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Gudang Garam has no effect on the direction of Charoen Pokphand i.e., Charoen Pokphand and PT Gudang go up and down completely randomly.

Pair Corralation between Charoen Pokphand and PT Gudang

Assuming the 90 days trading horizon Charoen Pokphand Foods is expected to generate 0.51 times more return on investment than PT Gudang. However, Charoen Pokphand Foods is 1.94 times less risky than PT Gudang. It trades about 0.0 of its potential returns per unit of risk. PT Gudang Garam is currently generating about -0.09 per unit of risk. If you would invest  65.00  in Charoen Pokphand Foods on September 5, 2024 and sell it today you would lose (1.00) from holding Charoen Pokphand Foods or give up 1.54% 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.  PT Gudang Garam

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.

PT Gudang Garam

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Gudang Garam has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Charoen Pokphand and PT Gudang

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

The idea behind Charoen Pokphand Foods and PT Gudang Garam 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.