Correlation Between Indofood Cbp and Matahari Department

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

Diversification Opportunities for Indofood Cbp and Matahari Department

0.3

Correlation Coefficient

Indofood Cbp  Matahari Department

Weak diversification

The 3 months correlation between Indofood and Matahari is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Indofood Cbp Sukses and Matahari Department Store in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matahari Department Store 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 Matahari Department. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matahari Department Store has no effect on the direction of Indofood Cbp i.e., Indofood Cbp and Matahari Department go up and down completely randomly.

Pair Corralation between Indofood Cbp and Matahari Department

Assuming the 90 days trading horizon Indofood Cbp Sukses is expected to generate 0.88 times more return on investment than Matahari Department. However, Indofood Cbp Sukses is 1.14 times less risky than Matahari Department. It trades about 0.04 of its potential returns per unit of risk. Matahari Department Store is currently generating about -0.14 per unit of risk. If you would invest  1,140,000  in Indofood Cbp Sukses on September 4, 2024 and sell it today you would earn a total of  40,000  from holding Indofood Cbp Sukses or generate 3.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Indofood Cbp Sukses  vs.  Matahari Department Store

Indofood Cbp Sukses

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Indofood Cbp Sukses are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Indofood Cbp is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Matahari Department Store

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Matahari Department Store 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 January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Indofood Cbp and Matahari Department

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

The idea behind Indofood Cbp Sukses and Matahari Department Store 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.

Check out your portfolio center.

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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.