Correlation Between PT Indofood and SEIKO EPSON

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

Diversification Opportunities for PT Indofood and SEIKO EPSON

0.31

Correlation Coefficient

PT Indofood  SEIKO EPSON

Weak diversification

The 3 months correlation between ISM and SEIKO is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding PT Indofood Sukses and SEIKO EPSON PADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEIKO EPSON PADR 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 SEIKO EPSON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEIKO EPSON PADR has no effect on the direction of PT Indofood i.e., PT Indofood and SEIKO EPSON go up and down completely randomly.

Pair Corralation between PT Indofood and SEIKO EPSON

Assuming the 90 days horizon PT Indofood Sukses is expected to generate 1.68 times more return on investment than SEIKO EPSON. However, PT Indofood is 1.68 times more volatile than SEIKO EPSON PADR. It trades about -0.01 of its potential returns per unit of risk. SEIKO EPSON PADR is currently generating about -0.02 per unit of risk. If you would invest  44.00  in PT Indofood Sukses on November 29, 2024 and sell it today you would lose (2.00) from holding PT Indofood Sukses or give up 4.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

PT Indofood Sukses  vs.  SEIKO EPSON PADR

PT Indofood Sukses

Risk-Adjusted Performance

Weak

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

SEIKO EPSON PADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days SEIKO EPSON PADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, SEIKO EPSON is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PT Indofood and SEIKO EPSON

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

The idea behind PT Indofood Sukses and SEIKO EPSON PADR 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.