Correlation Between Branded Legacy and Indofood Sukses

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

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

Diversification Opportunities for Branded Legacy and Indofood Sukses

-0.2

Correlation Coefficient

Branded Legacy  Indofood Sukses

Good diversification

The 3 months correlation between Branded and Indofood is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Branded Legacy and Indofood Sukses Makmur in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indofood Sukses Makmur and Branded Legacy 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 Branded Legacy are associated (or correlated) with Indofood Sukses. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indofood Sukses Makmur has no effect on the direction of Branded Legacy i.e., Branded Legacy and Indofood Sukses go up and down completely randomly.

Pair Corralation between Branded Legacy and Indofood Sukses

Given the investment horizon of 90 days Branded Legacy is expected to under-perform the Indofood Sukses. In addition to that, Branded Legacy is 1.71 times more volatile than Indofood Sukses Makmur. It trades about -0.04 of its total potential returns per unit of risk. Indofood Sukses Makmur is currently generating about 0.02 per unit of volatility. If you would invest  2,569  in Indofood Sukses Makmur on October 14, 2024 and sell it today you would lose (14.00) from holding Indofood Sukses Makmur or give up 0.54% of portfolio value over 90 days.

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

Branded Legacy  vs.  Indofood Sukses Makmur

Branded Legacy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Branded Legacy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Indofood Sukses Makmur

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Indofood Sukses Makmur are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Indofood Sukses showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Branded Legacy and Indofood Sukses

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

The idea behind Branded Legacy and Indofood Sukses Makmur 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.