Correlation Between PT Indofood and USU Software

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

Diversification Opportunities for PT Indofood and USU Software

0.7

Correlation Coefficient

PT Indofood  USU Software

Poor diversification

The 3 months correlation between ISM and USU is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding PT Indofood Sukses and USU Software AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USU Software AG 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 USU Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USU Software AG has no effect on the direction of PT Indofood i.e., PT Indofood and USU Software go up and down completely randomly.

Pair Corralation between PT Indofood and USU Software

Assuming the 90 days horizon PT Indofood is expected to generate 1.33 times less return on investment than USU Software. In addition to that, PT Indofood is 1.35 times more volatile than USU Software AG. It trades about 0.11 of its total potential returns per unit of risk. USU Software AG is currently generating about 0.19 per unit of volatility. If you would invest  1,720  in USU Software AG on September 13, 2024 and sell it today you would earn a total of  540.00  from holding USU Software AG or generate 31.4% return on investment over 90 days.

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

PT Indofood Sukses  vs.  USU Software AG

PT Indofood Sukses

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PT Indofood Sukses are ranked lower than 8 (%) 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.

USU Software AG

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in USU Software AG are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, USU Software reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Indofood and USU Software

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

The idea behind PT Indofood Sukses and USU Software AG 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.