Correlation Between PT Indofood and Nusa Palapa

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

Diversification Opportunities for PT Indofood and Nusa Palapa

-0.4

Correlation Coefficient

PT Indofood  Nusa Palapa

Very good diversification

The 3 months correlation between INDF and Nusa is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding PT Indofood Sukses and Nusa Palapa Gemilang in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nusa Palapa Gemilang 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 Nusa Palapa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nusa Palapa Gemilang has no effect on the direction of PT Indofood i.e., PT Indofood and Nusa Palapa go up and down completely randomly.

Pair Corralation between PT Indofood and Nusa Palapa

Assuming the 90 days trading horizon PT Indofood Sukses is expected to generate 0.39 times more return on investment than Nusa Palapa. However, PT Indofood Sukses is 2.55 times less risky than Nusa Palapa. It trades about 0.17 of its potential returns per unit of risk. Nusa Palapa Gemilang is currently generating about -0.01 per unit of risk. If you would invest  700,000  in PT Indofood Sukses on September 11, 2024 and sell it today you would earn a total of  120,000  from holding PT Indofood Sukses or generate 17.14% return on investment over 90 days.

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

PT Indofood Sukses  vs.  Nusa Palapa Gemilang

PT Indofood Sukses

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PT Indofood Sukses are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, PT Indofood disclosed solid returns over the last few months and may actually be approaching a breakup point.

Nusa Palapa Gemilang

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nusa Palapa Gemilang has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Nusa Palapa 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 Nusa Palapa

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

The idea behind PT Indofood Sukses and Nusa Palapa Gemilang 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.