Correlation Between PT Indofood and Granite Construction

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

Diversification Opportunities for PT Indofood and Granite Construction

0.72

Correlation Coefficient

PT Indofood  Granite Construction

Poor diversification

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

Pair Corralation between PT Indofood and Granite Construction

Assuming the 90 days horizon PT Indofood Sukses is expected to generate 2.27 times more return on investment than Granite Construction. However, PT Indofood is 2.27 times more volatile than Granite Construction. It trades about -0.03 of its potential returns per unit of risk. Granite Construction is currently generating about -0.13 per unit of risk. If you would invest  44.00  in PT Indofood Sukses on December 29, 2024 and sell it today you would lose (6.00) from holding PT Indofood Sukses or give up 13.64% of portfolio value over 90 days.

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

PT Indofood Sukses  vs.  Granite Construction

PT Indofood Sukses

Risk-Adjusted Performance

Very Weak

Over the last 90 days PT Indofood Sukses has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady 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.

Granite Construction

Risk-Adjusted Performance

Very Weak

Over the last 90 days Granite Construction has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with PT Indofood and Granite Construction

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

The idea behind PT Indofood Sukses and Granite Construction 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.