Correlation Between National Beverage and PT Indofood

Can any of the company-specific risk be diversified away by investing in both National Beverage and PT Indofood 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 National Beverage and PT Indofood into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between National Beverage Corp and PT Indofood Sukses, you can compare the effects of market volatilities on National Beverage and PT Indofood 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 National Beverage with a short position of PT Indofood. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Beverage and PT Indofood.

Diversification Opportunities for National Beverage and PT Indofood

0.31

Correlation Coefficient

National Beverage  PT Indofood

Weak diversification

The 3 months correlation between National and ISM is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding National Beverage Corp and PT Indofood Sukses in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Indofood Sukses and National Beverage 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 National Beverage Corp are associated (or correlated) with PT Indofood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Indofood Sukses has no effect on the direction of National Beverage i.e., National Beverage and PT Indofood go up and down completely randomly.

Pair Corralation between National Beverage and PT Indofood

Assuming the 90 days horizon National Beverage Corp is expected to under-perform the PT Indofood. But the stock apears to be less risky and, when comparing its historical volatility, National Beverage Corp is 2.1 times less risky than PT Indofood. The stock trades about -0.22 of its potential returns per unit of risk. The PT Indofood Sukses is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  45.00  in PT Indofood Sukses on December 4, 2024 and sell it today you would lose (4.00) from holding PT Indofood Sukses or give up 8.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

National Beverage Corp  vs.  PT Indofood Sukses

National Beverage Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Beverage Corp 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 April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

PT Indofood Sukses

Risk-Adjusted Performance

Very Weak

Over the last 90 days PT Indofood Sukses has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PT Indofood is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with National Beverage and PT Indofood

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

The idea behind National Beverage Corp and PT Indofood Sukses 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.