Correlation Between PT Indofood and Widodo Makmur

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

Diversification Opportunities for PT Indofood and Widodo Makmur

0.07

Correlation Coefficient

PT Indofood  Widodo Makmur

Significant diversification

The 3 months correlation between INDF and Widodo is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding PT Indofood Sukses and Widodo Makmur Unggas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Widodo Makmur Unggas 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 Widodo Makmur. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Widodo Makmur Unggas has no effect on the direction of PT Indofood i.e., PT Indofood and Widodo Makmur go up and down completely randomly.

Pair Corralation between PT Indofood and Widodo Makmur

Assuming the 90 days trading horizon PT Indofood Sukses is expected to under-perform the Widodo Makmur. But the stock apears to be less risky and, when comparing its historical volatility, PT Indofood Sukses is 3.03 times less risky than Widodo Makmur. The stock trades about -0.04 of its potential returns per unit of risk. The Widodo Makmur Unggas is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  900.00  in Widodo Makmur Unggas on December 3, 2024 and sell it today you would lose (100.00) from holding Widodo Makmur Unggas or give up 11.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

PT Indofood Sukses  vs.  Widodo Makmur Unggas

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.

Widodo Makmur Unggas

Risk-Adjusted Performance

Very Weak

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

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

The idea behind PT Indofood Sukses and Widodo Makmur Unggas 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.