Correlation Between PT Indofood and Bank Maybank

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

Diversification Opportunities for PT Indofood and Bank Maybank

-0.74

Correlation Coefficient

PT Indofood  Bank Maybank

Pay attention - limited upside

The 3 months correlation between INDF and Bank is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding PT Indofood Sukses and Bank Maybank Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Maybank Indonesia 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 Bank Maybank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Maybank Indonesia has no effect on the direction of PT Indofood i.e., PT Indofood and Bank Maybank go up and down completely randomly.

Pair Corralation between PT Indofood and Bank Maybank

Assuming the 90 days trading horizon PT Indofood Sukses is expected to generate 1.57 times more return on investment than Bank Maybank. However, PT Indofood is 1.57 times more volatile than Bank Maybank Indonesia. It trades about 0.12 of its potential returns per unit of risk. Bank Maybank Indonesia is currently generating about -0.14 per unit of risk. If you would invest  677,500  in PT Indofood Sukses on September 3, 2024 and sell it today you would earn a total of  77,500  from holding PT Indofood Sukses or generate 11.44% return on investment over 90 days.

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

PT Indofood Sukses  vs.  Bank Maybank Indonesia

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.

Bank Maybank Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Maybank Indonesia 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.

Pair Trading with PT Indofood and Bank Maybank

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

The idea behind PT Indofood Sukses and Bank Maybank Indonesia 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.