Correlation Between Astral Foods and PT Indofood

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

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

Diversification Opportunities for Astral Foods and PT Indofood

-0.08

Correlation Coefficient

Astral Foods  PT Indofood

Good diversification

The 3 months correlation between Astral and ISM is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Astral Foods Limited 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 Astral Foods 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 Astral Foods Limited 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 Astral Foods i.e., Astral Foods and PT Indofood go up and down completely randomly.

Pair Corralation between Astral Foods and PT Indofood

Assuming the 90 days trading horizon Astral Foods Limited is expected to generate 3.82 times more return on investment than PT Indofood. However, Astral Foods is 3.82 times more volatile than PT Indofood Sukses. It trades about 0.12 of its potential returns per unit of risk. PT Indofood Sukses is currently generating about -0.03 per unit of risk. If you would invest  378.00  in Astral Foods Limited on December 28, 2024 and sell it today you would earn a total of  427.00  from holding Astral Foods Limited or generate 112.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Astral Foods Limited  vs.  PT Indofood Sukses

Astral Foods Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Astral Foods Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Astral Foods unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Astral Foods and PT Indofood

The main advantage of trading using opposite Astral Foods and PT Indofood positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Astral Foods 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 Astral Foods Limited 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.