Correlation Between PT Indofood and SOFTBANK CORP

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

Diversification Opportunities for PT Indofood and SOFTBANK CORP

0.45

Correlation Coefficient

PT Indofood  SOFTBANK CORP

Very weak diversification

The 3 months correlation between ISM and SOFTBANK is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding PT Indofood Sukses and SOFTBANK P ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOFTBANK P ADR 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 SOFTBANK CORP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOFTBANK P ADR has no effect on the direction of PT Indofood i.e., PT Indofood and SOFTBANK CORP go up and down completely randomly.

Pair Corralation between PT Indofood and SOFTBANK CORP

Assuming the 90 days horizon PT Indofood Sukses is expected to under-perform the SOFTBANK CORP. But the stock apears to be less risky and, when comparing its historical volatility, PT Indofood Sukses is 1.03 times less risky than SOFTBANK CORP. The stock trades about -0.05 of its potential returns per unit of risk. The SOFTBANK P ADR is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,150  in SOFTBANK P ADR on October 7, 2024 and sell it today you would lose (20.00) from holding SOFTBANK P ADR or give up 1.74% of portfolio value over 90 days.

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

PT Indofood Sukses  vs.  SOFTBANK P ADR

PT Indofood Sukses

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PT Indofood Sukses are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PT Indofood reported solid returns over the last few months and may actually be approaching a breakup point.

SOFTBANK P ADR

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SOFTBANK P ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, SOFTBANK CORP is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PT Indofood and SOFTBANK CORP

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

The idea behind PT Indofood Sukses and SOFTBANK P ADR 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.