Correlation Between Charoen Pokphand and INDOFOOD AGRI

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

Diversification Opportunities for Charoen Pokphand and INDOFOOD AGRI

-0.16

Correlation Coefficient

Charoen Pokphand  INDOFOOD AGRI

Good diversification

The 3 months correlation between Charoen and INDOFOOD is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Charoen Pokphand Foods and INDOFOOD AGRI RES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INDOFOOD AGRI RES 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 INDOFOOD AGRI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INDOFOOD AGRI RES has no effect on the direction of Charoen Pokphand i.e., Charoen Pokphand and INDOFOOD AGRI go up and down completely randomly.

Pair Corralation between Charoen Pokphand and INDOFOOD AGRI

Assuming the 90 days trading horizon Charoen Pokphand Foods is expected to under-perform the INDOFOOD AGRI. In addition to that, Charoen Pokphand is 1.9 times more volatile than INDOFOOD AGRI RES. It trades about -0.17 of its total potential returns per unit of risk. INDOFOOD AGRI RES is currently generating about 0.01 per unit of volatility. If you would invest  22.00  in INDOFOOD AGRI RES on October 13, 2024 and sell it today you would earn a total of  0.00  from holding INDOFOOD AGRI RES or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

Charoen Pokphand Foods  vs.  INDOFOOD AGRI RES

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.

INDOFOOD AGRI RES

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in INDOFOOD AGRI RES are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, INDOFOOD AGRI is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Charoen Pokphand and INDOFOOD AGRI

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

The idea behind Charoen Pokphand Foods and INDOFOOD AGRI RES 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.