Correlation Between Indofood Cbp and Charoen Pokphand
Can any of the company-specific risk be diversified away by investing in both Indofood Cbp 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 Indofood Cbp and Charoen Pokphand into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Indofood Cbp Sukses and Charoen Pokphand Indonesia, you can compare the effects of market volatilities on Indofood Cbp 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 Indofood Cbp with a short position of Charoen Pokphand. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indofood Cbp and Charoen Pokphand.
Diversification Opportunities for Indofood Cbp and Charoen Pokphand
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Indofood and Charoen is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Indofood Cbp Sukses and Charoen Pokphand Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charoen Pokphand Ind and Indofood Cbp 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 Indofood Cbp Sukses 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 Ind has no effect on the direction of Indofood Cbp i.e., Indofood Cbp and Charoen Pokphand go up and down completely randomly.
Pair Corralation between Indofood Cbp and Charoen Pokphand
Assuming the 90 days trading horizon Indofood Cbp Sukses is expected to under-perform the Charoen Pokphand. In addition to that, Indofood Cbp is 1.28 times more volatile than Charoen Pokphand Indonesia. It trades about -0.26 of its total potential returns per unit of risk. Charoen Pokphand Indonesia is currently generating about -0.13 per unit of volatility. If you would invest 530,000 in Charoen Pokphand Indonesia on January 24, 2024 and sell it today you would lose (25,000) from holding Charoen Pokphand Indonesia or give up 4.72% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Indofood Cbp Sukses vs. Charoen Pokphand Indonesia
Performance |
| Timeline |
| Indofood Cbp Sukses |
| Charoen Pokphand Ind |
Indofood Cbp and Charoen Pokphand Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Indofood Cbp and Charoen Pokphand
The main advantage of trading using opposite Indofood Cbp and Charoen Pokphand positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indofood Cbp 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 Indofood Cbp Sukses and Charoen Pokphand Indonesia 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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