Correlation Between PT Indofood and SHELF DRILLING

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

Diversification Opportunities for PT Indofood and SHELF DRILLING

-0.64

Correlation Coefficient

PT Indofood  SHELF DRILLING

Excellent diversification

The 3 months correlation between ISM and SHELF is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding PT Indofood Sukses and SHELF DRILLING LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHELF DRILLING LTD 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 SHELF DRILLING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHELF DRILLING LTD has no effect on the direction of PT Indofood i.e., PT Indofood and SHELF DRILLING go up and down completely randomly.

Pair Corralation between PT Indofood and SHELF DRILLING

Assuming the 90 days horizon PT Indofood Sukses is expected to generate 0.35 times more return on investment than SHELF DRILLING. However, PT Indofood Sukses is 2.88 times less risky than SHELF DRILLING. It trades about 0.05 of its potential returns per unit of risk. SHELF DRILLING LTD is currently generating about -0.17 per unit of risk. If you would invest  42.00  in PT Indofood Sukses on September 3, 2024 and sell it today you would earn a total of  1.00  from holding PT Indofood Sukses or generate 2.38% return on investment over 90 days.

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

PT Indofood Sukses  vs.  SHELF DRILLING LTD

PT Indofood Sukses

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PT Indofood Sukses are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PT Indofood may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SHELF DRILLING LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SHELF DRILLING LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with PT Indofood and SHELF DRILLING

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

The idea behind PT Indofood Sukses and SHELF DRILLING LTD 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.