Correlation Between Gudang Garam and Indofood Cbp

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

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

Diversification Opportunities for Gudang Garam and Indofood Cbp

0.1

Correlation Coefficient

Gudang Garam  Indofood Cbp

Average diversification

The 3 months correlation between Gudang and Indofood is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Gudang Garam Tbk and Indofood Cbp Sukses in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indofood Cbp Sukses and Gudang Garam 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 Gudang Garam Tbk are associated (or correlated) with Indofood Cbp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indofood Cbp Sukses has no effect on the direction of Gudang Garam i.e., Gudang Garam and Indofood Cbp go up and down completely randomly.

Pair Corralation between Gudang Garam and Indofood Cbp

Assuming the 90 days trading horizon Gudang Garam Tbk is expected to under-perform the Indofood Cbp. But the stock apears to be less risky and, when comparing its historical volatility, Gudang Garam Tbk is 1.12 times less risky than Indofood Cbp. The stock trades about -0.17 of its potential returns per unit of risk. The Indofood Cbp Sukses is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  1,185,000  in Indofood Cbp Sukses on December 2, 2024 and sell it today you would lose (132,500) from holding Indofood Cbp Sukses or give up 11.18% of portfolio value over 90 days.

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

Gudang Garam Tbk  vs.  Indofood Cbp Sukses

Gudang Garam Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gudang Garam Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Indofood Cbp Sukses

Risk-Adjusted Performance

Very Weak

Over the last 90 days Indofood Cbp Sukses has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Gudang Garam and Indofood Cbp

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

The idea behind Gudang Garam Tbk and Indofood Cbp 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..