Correlation Between Quality Houses and Charoen Pokphand

Can any of the company-specific risk be diversified away by investing in both Quality Houses and Charoen Pokphand 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 Quality Houses and Charoen Pokphand into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Quality Houses Public and Charoen Pokphand Foods, you can compare the effects of market volatilities on Quality Houses and Charoen Pokphand 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 Quality Houses with a short position of Charoen Pokphand. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quality Houses and Charoen Pokphand.

Diversification Opportunities for Quality Houses and Charoen Pokphand

-0.44

Correlation Coefficient

Quality Houses  Charoen Pokphand

Very good diversification

The 3 months correlation between Quality and Charoen is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Quality Houses Public and Charoen Pokphand Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charoen Pokphand Foods and Quality Houses 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 Quality Houses Public are associated (or correlated) with Charoen Pokphand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charoen Pokphand Foods has no effect on the direction of Quality Houses i.e., Quality Houses and Charoen Pokphand go up and down completely randomly.

Pair Corralation between Quality Houses and Charoen Pokphand

Assuming the 90 days horizon Quality Houses Public is expected to under-perform the Charoen Pokphand. But the stock apears to be less risky and, when comparing its historical volatility, Quality Houses Public is 2.19 times less risky than Charoen Pokphand. The stock trades about -0.14 of its potential returns per unit of risk. The Charoen Pokphand Foods is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,280  in Charoen Pokphand Foods on December 30, 2024 and sell it today you would earn a total of  110.00  from holding Charoen Pokphand Foods or generate 4.82% return on investment over 90 days.

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

Quality Houses Public  vs.  Charoen Pokphand Foods

Quality Houses Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Quality Houses Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental drivers remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Charoen Pokphand Foods

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Charoen Pokphand Foods are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Charoen Pokphand may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Quality Houses and Charoen Pokphand

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

The idea behind Quality Houses Public and Charoen Pokphand 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 Transaction History module to view history of all your transactions and understand their impact on performance.