Correlation Between PT Indofood and Cisadane Sawit

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

Diversification Opportunities for PT Indofood and Cisadane Sawit

0.56

Correlation Coefficient

PT Indofood  Cisadane Sawit

Very weak diversification

The 3 months correlation between INDF and Cisadane is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding PT Indofood Sukses and Cisadane Sawit Raya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisadane Sawit Raya 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 Cisadane Sawit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cisadane Sawit Raya has no effect on the direction of PT Indofood i.e., PT Indofood and Cisadane Sawit go up and down completely randomly.

Pair Corralation between PT Indofood and Cisadane Sawit

Assuming the 90 days trading horizon PT Indofood is expected to generate 1.29 times less return on investment than Cisadane Sawit. But when comparing it to its historical volatility, PT Indofood Sukses is 1.61 times less risky than Cisadane Sawit. It trades about 0.03 of its potential returns per unit of risk. Cisadane Sawit Raya is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  58,533  in Cisadane Sawit Raya on October 22, 2024 and sell it today you would earn a total of  10,967  from holding Cisadane Sawit Raya or generate 18.74% return on investment over 90 days.

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

PT Indofood Sukses  vs.  Cisadane Sawit Raya

PT Indofood Sukses

Risk-Adjusted Performance

0 of 100

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.

Cisadane Sawit Raya

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cisadane Sawit Raya are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Cisadane Sawit may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with PT Indofood and Cisadane Sawit

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

The idea behind PT Indofood Sukses and Cisadane Sawit Raya 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.