Correlation Between Indofood Cbp and Tempo Inti

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

Diversification Opportunities for Indofood Cbp and Tempo Inti

0.4

Correlation Coefficient

Indofood Cbp  Tempo Inti

Very weak diversification

The 3 months correlation between Indofood and Tempo is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Indofood Cbp Sukses and Tempo Inti Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tempo Inti Media 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 Tempo Inti. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tempo Inti Media has no effect on the direction of Indofood Cbp i.e., Indofood Cbp and Tempo Inti go up and down completely randomly.

Pair Corralation between Indofood Cbp and Tempo Inti

Assuming the 90 days trading horizon Indofood Cbp is expected to generate 4.36 times less return on investment than Tempo Inti. But when comparing it to its historical volatility, Indofood Cbp Sukses is 3.35 times less risky than Tempo Inti. It trades about 0.03 of its potential returns per unit of risk. Tempo Inti Media is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  11,500  in Tempo Inti Media on September 28, 2024 and sell it today you would earn a total of  4,900  from holding Tempo Inti Media or generate 42.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

Indofood Cbp Sukses  vs.  Tempo Inti Media

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 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.

Tempo Inti Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tempo Inti Media 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 Tempo Inti

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

The idea behind Indofood Cbp Sukses and Tempo Inti Media 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 Commodity Directory module to find actively traded commodities issued by global exchanges.