Correlation Between PT Indofood and Wijaya Karya

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

Diversification Opportunities for PT Indofood and Wijaya Karya

0.22

Correlation Coefficient

PT Indofood  Wijaya Karya

Modest diversification

The 3 months correlation between INDF and Wijaya is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding PT Indofood Sukses and Wijaya Karya Beton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wijaya Karya Beton 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 Wijaya Karya. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wijaya Karya Beton has no effect on the direction of PT Indofood i.e., PT Indofood and Wijaya Karya go up and down completely randomly.

Pair Corralation between PT Indofood and Wijaya Karya

Assuming the 90 days trading horizon PT Indofood Sukses is expected to under-perform the Wijaya Karya. But the stock apears to be less risky and, when comparing its historical volatility, PT Indofood Sukses is 2.68 times less risky than Wijaya Karya. The stock trades about -0.05 of its potential returns per unit of risk. The Wijaya Karya Beton is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  7,700  in Wijaya Karya Beton on December 30, 2024 and sell it today you would lose (100.00) from holding Wijaya Karya Beton or give up 1.3% 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.  Wijaya Karya Beton

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 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.

Wijaya Karya Beton

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wijaya Karya Beton are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, Wijaya Karya may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with PT Indofood and Wijaya Karya

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

The idea behind PT Indofood Sukses and Wijaya Karya Beton 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.