Correlation Between PT Indofood and PT Bank

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

Diversification Opportunities for PT Indofood and PT Bank

-0.13

Correlation Coefficient

PT Indofood  PT Bank

Good diversification

The 3 months correlation between ISM and BZG2 is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding PT Indofood Sukses and PT Bank Central in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bank Central 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 PT Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Bank Central has no effect on the direction of PT Indofood i.e., PT Indofood and PT Bank go up and down completely randomly.

Pair Corralation between PT Indofood and PT Bank

Assuming the 90 days horizon PT Indofood Sukses is expected to generate 1.02 times more return on investment than PT Bank. However, PT Indofood is 1.02 times more volatile than PT Bank Central. It trades about -0.02 of its potential returns per unit of risk. PT Bank Central is currently generating about -0.18 per unit of risk. If you would invest  44.00  in PT Indofood Sukses on October 22, 2024 and sell it today you would lose (1.00) from holding PT Indofood Sukses or give up 2.27% of portfolio value over 90 days.

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

PT Indofood Sukses  vs.  PT Bank Central

PT Indofood Sukses

Risk-Adjusted Performance

2 of 100

Weak

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

PT Bank Central

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Bank Central has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with PT Indofood and PT Bank

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

The idea behind PT Indofood Sukses and PT Bank Central 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.