Correlation Between IDX 30 and Indofarma Tbk

Can any of the company-specific risk be diversified away by investing in both IDX 30 and Indofarma Tbk 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 IDX 30 and Indofarma Tbk into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between IDX 30 Jakarta and Indofarma Tbk, you can compare the effects of market volatilities on IDX 30 and Indofarma Tbk 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 IDX 30 with a short position of Indofarma Tbk. Check out your portfolio center. Please also check ongoing floating volatility patterns of IDX 30 and Indofarma Tbk.

Diversification Opportunities for IDX 30 and Indofarma Tbk

0.0

Correlation Coefficient

IDX 30  Indofarma Tbk

Pay attention - limited upside

The 3 months correlation between IDX and Indofarma is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding IDX 30 Jakarta and Indofarma Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indofarma Tbk and IDX 30 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 IDX 30 Jakarta are associated (or correlated) with Indofarma Tbk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indofarma Tbk has no effect on the direction of IDX 30 i.e., IDX 30 and Indofarma Tbk go up and down completely randomly.

Pair Corralation between IDX 30 and Indofarma Tbk

If you would invest  12,600  in Indofarma Tbk on December 1, 2024 and sell it today you would earn a total of  0.00  from holding Indofarma Tbk or generate 0.0% return on investment over 90 days.

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

IDX 30 Jakarta  vs.  Indofarma Tbk

Pair Trading with IDX 30 and Indofarma Tbk

The main advantage of trading using opposite IDX 30 and Indofarma Tbk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IDX 30 position performs unexpectedly, Indofarma Tbk 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 Indofarma Tbk will offset losses from the drop in Indofarma Tbk's long position.

The idea behind IDX 30 Jakarta and Indofarma 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.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.