Correlation Between PT Indofood and Cemindo Gemilang

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

Diversification Opportunities for PT Indofood and Cemindo Gemilang

0.27

Correlation Coefficient

PT Indofood  Cemindo Gemilang

Modest diversification

The 3 months correlation between INDF and Cemindo is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding PT Indofood Sukses and Cemindo Gemilang Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cemindo Gemilang 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 Cemindo Gemilang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cemindo Gemilang Tbk has no effect on the direction of PT Indofood i.e., PT Indofood and Cemindo Gemilang go up and down completely randomly.

Pair Corralation between PT Indofood and Cemindo Gemilang

Assuming the 90 days trading horizon PT Indofood Sukses is expected to generate 0.8 times more return on investment than Cemindo Gemilang. However, PT Indofood Sukses is 1.25 times less risky than Cemindo Gemilang. It trades about -0.05 of its potential returns per unit of risk. Cemindo Gemilang Tbk is currently generating about -0.13 per unit of risk. If you would invest  755,000  in PT Indofood Sukses on December 2, 2024 and sell it today you would lose (47,500) from holding PT Indofood Sukses or give up 6.29% of portfolio value over 90 days.

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

PT Indofood Sukses  vs.  Cemindo Gemilang Tbk

PT Indofood Sukses

Risk-Adjusted Performance

Very Weak

Over the last 90 days PT Indofood Sukses has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, PT Indofood is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Cemindo Gemilang Tbk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cemindo Gemilang Tbk 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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with PT Indofood and Cemindo Gemilang

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

The idea behind PT Indofood Sukses and Cemindo Gemilang 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.