Correlation Between PT Indofood and BG Foods

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

Diversification Opportunities for PT Indofood and BG Foods

-0.16

Correlation Coefficient

PT Indofood  BG Foods

Good diversification

The 3 months correlation between ISM and DHR is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding PT Indofood Sukses and BG Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BG Foods 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 BG Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BG Foods has no effect on the direction of PT Indofood i.e., PT Indofood and BG Foods go up and down completely randomly.

Pair Corralation between PT Indofood and BG Foods

Assuming the 90 days horizon PT Indofood Sukses is expected to generate 1.58 times more return on investment than BG Foods. However, PT Indofood is 1.58 times more volatile than BG Foods. It trades about -0.02 of its potential returns per unit of risk. BG Foods 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.  BG Foods

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.

BG Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BG Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with PT Indofood and BG Foods

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

The idea behind PT Indofood Sukses and BG Foods 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.