Correlation Between APPLIED MATERIALS and INDOFOOD AGRI

Can any of the company-specific risk be diversified away by investing in both APPLIED MATERIALS and INDOFOOD AGRI 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 APPLIED MATERIALS and INDOFOOD AGRI into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between APPLIED MATERIALS and INDOFOOD AGRI RES, you can compare the effects of market volatilities on APPLIED MATERIALS and INDOFOOD AGRI 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 APPLIED MATERIALS with a short position of INDOFOOD AGRI. Check out your portfolio center. Please also check ongoing floating volatility patterns of APPLIED MATERIALS and INDOFOOD AGRI.

Diversification Opportunities for APPLIED MATERIALS and INDOFOOD AGRI

-0.02

Correlation Coefficient

APPLIED MATERIALS  INDOFOOD AGRI

Good diversification

The 3 months correlation between APPLIED and INDOFOOD is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS and INDOFOOD AGRI RES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INDOFOOD AGRI RES and APPLIED MATERIALS 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 APPLIED MATERIALS are associated (or correlated) with INDOFOOD AGRI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INDOFOOD AGRI RES has no effect on the direction of APPLIED MATERIALS i.e., APPLIED MATERIALS and INDOFOOD AGRI go up and down completely randomly.

Pair Corralation between APPLIED MATERIALS and INDOFOOD AGRI

Assuming the 90 days trading horizon APPLIED MATERIALS is expected to generate 1.25 times more return on investment than INDOFOOD AGRI. However, APPLIED MATERIALS is 1.25 times more volatile than INDOFOOD AGRI RES. It trades about 0.04 of its potential returns per unit of risk. INDOFOOD AGRI RES is currently generating about 0.05 per unit of risk. If you would invest  17,413  in APPLIED MATERIALS on October 26, 2024 and sell it today you would earn a total of  781.00  from holding APPLIED MATERIALS or generate 4.49% return on investment over 90 days.

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

APPLIED MATERIALS  vs.  INDOFOOD AGRI RES

APPLIED MATERIALS

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in APPLIED MATERIALS are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, APPLIED MATERIALS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

INDOFOOD AGRI RES

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in INDOFOOD AGRI RES are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, INDOFOOD AGRI is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with APPLIED MATERIALS and INDOFOOD AGRI

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

The idea behind APPLIED MATERIALS and INDOFOOD AGRI RES 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.