Correlation Between VARIOUS EATERIES and PT Indofood

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

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

Diversification Opportunities for VARIOUS EATERIES and PT Indofood

0.56

Correlation Coefficient

VARIOUS EATERIES  PT Indofood

Very weak diversification

The 3 months correlation between VARIOUS and ISM is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding VARIOUS EATERIES LS 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 VARIOUS EATERIES 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 VARIOUS EATERIES LS 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 VARIOUS EATERIES i.e., VARIOUS EATERIES and PT Indofood go up and down completely randomly.

Pair Corralation between VARIOUS EATERIES and PT Indofood

Assuming the 90 days horizon VARIOUS EATERIES is expected to generate 3.31 times less return on investment than PT Indofood. But when comparing it to its historical volatility, VARIOUS EATERIES LS is 2.41 times less risky than PT Indofood. It trades about 0.06 of its potential returns per unit of risk. PT Indofood Sukses is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  38.00  in PT Indofood Sukses on August 31, 2024 and sell it today you would earn a total of  6.00  from holding PT Indofood Sukses or generate 15.79% return on investment over 90 days.

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

VARIOUS EATERIES LS  vs.  PT Indofood Sukses

VARIOUS EATERIES

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in VARIOUS EATERIES LS are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, VARIOUS EATERIES is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

PT Indofood Sukses

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PT Indofood Sukses are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PT Indofood reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VARIOUS EATERIES and PT Indofood

The main advantage of trading using opposite VARIOUS EATERIES and PT Indofood positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VARIOUS EATERIES 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 VARIOUS EATERIES LS 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.