Correlation Between Citic Telecom and PT Indofood

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

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

Diversification Opportunities for Citic Telecom and PT Indofood

-0.25

Correlation Coefficient

Citic Telecom  PT Indofood

Very good diversification

The 3 months correlation between Citic and ISM is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Citic Telecom International 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 Citic Telecom 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 Citic Telecom International 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 Citic Telecom i.e., Citic Telecom and PT Indofood go up and down completely randomly.

Pair Corralation between Citic Telecom and PT Indofood

Assuming the 90 days trading horizon Citic Telecom International is expected to generate 0.64 times more return on investment than PT Indofood. However, Citic Telecom International is 1.56 times less risky than PT Indofood. It trades about 0.01 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  27.00  in Citic Telecom International on December 20, 2024 and sell it today you would earn a total of  0.00  from holding Citic Telecom International or generate 0.0% return on investment over 90 days.

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

Citic Telecom International  vs.  PT Indofood Sukses

Citic Telecom Intern

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citic Telecom International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Citic Telecom is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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 Citic Telecom and PT Indofood

The main advantage of trading using opposite Citic Telecom and PT Indofood positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citic Telecom 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 Citic Telecom International 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.