Correlation Between PT Indofood and Astra International

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

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

Diversification Opportunities for PT Indofood and Astra International

0.18

Correlation Coefficient

PT Indofood  Astra International

Average diversification

The 3 months correlation between INDF and Astra is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding PT Indofood Sukses and Astra International Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astra International Tbk and PT Indofood 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 PT Indofood Sukses are associated (or correlated) with Astra International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astra International Tbk has no effect on the direction of PT Indofood i.e., PT Indofood and Astra International go up and down completely randomly.

Pair Corralation between PT Indofood and Astra International

Assuming the 90 days trading horizon PT Indofood Sukses is expected to generate 1.13 times more return on investment than Astra International. However, PT Indofood is 1.13 times more volatile than Astra International Tbk. It trades about 0.05 of its potential returns per unit of risk. Astra International Tbk is currently generating about -0.01 per unit of risk. If you would invest  745,000  in PT Indofood Sukses on September 3, 2024 and sell it today you would earn a total of  10,000  from holding PT Indofood Sukses or generate 1.34% return on investment over 90 days.

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

PT Indofood Sukses  vs.  Astra International Tbk

PT Indofood Sukses

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PT Indofood Sukses are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, PT Indofood may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Astra International Tbk

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Astra International Tbk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Astra International is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with PT Indofood and Astra International

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

The idea behind PT Indofood Sukses and Astra International 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.