Correlation Between Indofood Cbp and First Media

Can any of the company-specific risk be diversified away by investing in both Indofood Cbp and First Media 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 First Media 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 First Media Tbk, you can compare the effects of market volatilities on Indofood Cbp and First Media 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 First Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indofood Cbp and First Media.

Diversification Opportunities for Indofood Cbp and First Media

-0.51

Correlation Coefficient

Indofood Cbp  First Media

Excellent diversification

The 3 months correlation between Indofood and First is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Indofood Cbp Sukses and First Media Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Media Tbk 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 First Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Media Tbk has no effect on the direction of Indofood Cbp i.e., Indofood Cbp and First Media go up and down completely randomly.

Pair Corralation between Indofood Cbp and First Media

Assuming the 90 days trading horizon Indofood Cbp Sukses is expected to generate 0.95 times more return on investment than First Media. However, Indofood Cbp Sukses is 1.06 times less risky than First Media. It trades about -0.2 of its potential returns per unit of risk. First Media Tbk is currently generating about -0.27 per unit of risk. If you would invest  1,172,500  in Indofood Cbp Sukses on October 11, 2024 and sell it today you would lose (62,500) from holding Indofood Cbp Sukses or give up 5.33% of portfolio value over 90 days.

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

Indofood Cbp Sukses  vs.  First Media Tbk

Indofood Cbp Sukses

Risk-Adjusted Performance

0 of 100

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.

First Media Tbk

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Media Tbk are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, First Media disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Indofood Cbp and First Media

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

The idea behind Indofood Cbp Sukses and First Media Tbk 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.