Correlation Between PT Indofood and EIDESVIK OFFSHORE

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

Diversification Opportunities for PT Indofood and EIDESVIK OFFSHORE

-0.72

Correlation Coefficient

PT Indofood  EIDESVIK OFFSHORE

Pay attention - limited upside

The 3 months correlation between ISM and EIDESVIK is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding PT Indofood Sukses and EIDESVIK OFFSHORE NK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EIDESVIK OFFSHORE 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 EIDESVIK OFFSHORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EIDESVIK OFFSHORE has no effect on the direction of PT Indofood i.e., PT Indofood and EIDESVIK OFFSHORE go up and down completely randomly.

Pair Corralation between PT Indofood and EIDESVIK OFFSHORE

Assuming the 90 days horizon PT Indofood is expected to generate 1.47 times less return on investment than EIDESVIK OFFSHORE. In addition to that, PT Indofood is 1.26 times more volatile than EIDESVIK OFFSHORE NK. It trades about 0.03 of its total potential returns per unit of risk. EIDESVIK OFFSHORE NK is currently generating about 0.05 per unit of volatility. If you would invest  65.00  in EIDESVIK OFFSHORE NK on September 26, 2024 and sell it today you would earn a total of  43.00  from holding EIDESVIK OFFSHORE NK or generate 66.15% 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.  EIDESVIK OFFSHORE NK

PT Indofood Sukses

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PT Indofood Sukses are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, PT Indofood may actually be approaching a critical reversion point that can send shares even higher in January 2025.

EIDESVIK OFFSHORE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EIDESVIK OFFSHORE NK has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic 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 EIDESVIK OFFSHORE

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

The idea behind PT Indofood Sukses and EIDESVIK OFFSHORE NK 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.