Correlation Between Indofood Cbp and Austindo Nusantara

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

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

Diversification Opportunities for Indofood Cbp and Austindo Nusantara

-0.07

Correlation Coefficient

Indofood Cbp  Austindo Nusantara

Good diversification

The 3 months correlation between Indofood and Austindo is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Indofood Cbp Sukses and Austindo Nusantara Jaya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Austindo Nusantara Jaya and Indofood Cbp 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 Indofood Cbp Sukses are associated (or correlated) with Austindo Nusantara. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Austindo Nusantara Jaya has no effect on the direction of Indofood Cbp i.e., Indofood Cbp and Austindo Nusantara go up and down completely randomly.

Pair Corralation between Indofood Cbp and Austindo Nusantara

Assuming the 90 days trading horizon Indofood Cbp Sukses is expected to under-perform the Austindo Nusantara. But the stock apears to be less risky and, when comparing its historical volatility, Indofood Cbp Sukses is 1.06 times less risky than Austindo Nusantara. The stock trades about -0.11 of its potential returns per unit of risk. The Austindo Nusantara Jaya is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  73,500  in Austindo Nusantara Jaya on November 29, 2024 and sell it today you would earn a total of  16,500  from holding Austindo Nusantara Jaya or generate 22.45% return on investment over 90 days.

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

Indofood Cbp Sukses  vs.  Austindo Nusantara Jaya

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 conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Austindo Nusantara Jaya

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Austindo Nusantara Jaya are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Austindo Nusantara disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Indofood Cbp and Austindo Nusantara

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

The idea behind Indofood Cbp Sukses and Austindo Nusantara Jaya 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.