Correlation Between Binance Coin and PT Indofood

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

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

Diversification Opportunities for Binance Coin and PT Indofood

0.45

Correlation Coefficient

Binance Coin  PT Indofood

Very weak diversification

The 3 months correlation between Binance and ISM is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Binance Coin 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 Binance Coin 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 Binance Coin 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 Binance Coin i.e., Binance Coin and PT Indofood go up and down completely randomly.

Pair Corralation between Binance Coin and PT Indofood

Assuming the 90 days trading horizon Binance Coin is expected to generate 1.42 times more return on investment than PT Indofood. However, Binance Coin is 1.42 times more volatile than PT Indofood Sukses. It trades about -0.02 of its potential returns per unit of risk. PT Indofood Sukses is currently generating about -0.08 per unit of risk. If you would invest  66,306  in Binance Coin on December 20, 2024 and sell it today you would lose (4,546) from holding Binance Coin or give up 6.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Binance Coin  vs.  PT Indofood Sukses

Binance Coin

Risk-Adjusted Performance

Very Weak

Over the last 90 days Binance Coin has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Binance Coin is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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. In spite of latest fragile performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Binance Coin and PT Indofood

The main advantage of trading using opposite Binance Coin and PT Indofood positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Binance Coin 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 Binance Coin 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.