Correlation Between PT Indofood and ALERION CLEANPOWER

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

Diversification Opportunities for PT Indofood and ALERION CLEANPOWER

0.47

Correlation Coefficient

PT Indofood  ALERION CLEANPOWER

Very weak diversification

The 3 months correlation between ISM and ALERION is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding PT Indofood Sukses and ALERION CLEANPOWER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALERION CLEANPOWER 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 ALERION CLEANPOWER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALERION CLEANPOWER has no effect on the direction of PT Indofood i.e., PT Indofood and ALERION CLEANPOWER go up and down completely randomly.

Pair Corralation between PT Indofood and ALERION CLEANPOWER

Assuming the 90 days horizon PT Indofood Sukses is expected to generate 1.2 times more return on investment than ALERION CLEANPOWER. However, PT Indofood is 1.2 times more volatile than ALERION CLEANPOWER. It trades about 0.07 of its potential returns per unit of risk. ALERION CLEANPOWER is currently generating about 0.02 per unit of risk. If you would invest  40.00  in PT Indofood Sukses on October 15, 2024 and sell it today you would earn a total of  4.00  from holding PT Indofood Sukses or generate 10.0% return on investment over 90 days.

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

PT Indofood Sukses  vs.  ALERION CLEANPOWER

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.

ALERION CLEANPOWER

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ALERION CLEANPOWER are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ALERION CLEANPOWER is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PT Indofood and ALERION CLEANPOWER

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

The idea behind PT Indofood Sukses and ALERION CLEANPOWER 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.