Correlation Between Rayonier Advanced and Charoen Pokphand

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

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

Diversification Opportunities for Rayonier Advanced and Charoen Pokphand

-0.12

Correlation Coefficient

Rayonier Advanced  Charoen Pokphand

Good diversification

The 3 months correlation between Rayonier and Charoen is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Rayonier Advanced Materials 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 Rayonier Advanced 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 Rayonier Advanced Materials 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 Rayonier Advanced i.e., Rayonier Advanced and Charoen Pokphand go up and down completely randomly.

Pair Corralation between Rayonier Advanced and Charoen Pokphand

Assuming the 90 days horizon Rayonier Advanced Materials is expected to generate 1.15 times more return on investment than Charoen Pokphand. However, Rayonier Advanced is 1.15 times more volatile than Charoen Pokphand Foods. It trades about 0.1 of its potential returns per unit of risk. Charoen Pokphand Foods is currently generating about 0.05 per unit of risk. If you would invest  380.00  in Rayonier Advanced Materials on October 9, 2024 and sell it today you would earn a total of  410.00  from holding Rayonier Advanced Materials or generate 107.89% return on investment over 90 days.

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

Rayonier Advanced Materials  vs.  Charoen Pokphand Foods

Rayonier Advanced

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rayonier Advanced Materials are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Rayonier Advanced may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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.

Pair Trading with Rayonier Advanced and Charoen Pokphand

The main advantage of trading using opposite Rayonier Advanced and Charoen Pokphand positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rayonier Advanced 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 Rayonier Advanced Materials 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.