Correlation Between PT Indofood and Thai Beverage

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

Diversification Opportunities for PT Indofood and Thai Beverage

0.41

Correlation Coefficient

PT Indofood  Thai Beverage

Very weak diversification

The 3 months correlation between ISM and Thai is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding PT Indofood Sukses and Thai Beverage Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thai Beverage Public 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 Thai Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thai Beverage Public has no effect on the direction of PT Indofood i.e., PT Indofood and Thai Beverage go up and down completely randomly.

Pair Corralation between PT Indofood and Thai Beverage

Assuming the 90 days horizon PT Indofood Sukses is expected to under-perform the Thai Beverage. In addition to that, PT Indofood is 1.46 times more volatile than Thai Beverage Public. It trades about -0.02 of its total potential returns per unit of risk. Thai Beverage Public is currently generating about -0.03 per unit of volatility. If you would invest  37.00  in Thai Beverage Public on December 27, 2024 and sell it today you would lose (3.00) from holding Thai Beverage Public or give up 8.11% of portfolio value over 90 days.

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

PT Indofood Sukses  vs.  Thai Beverage Public

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 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.

Thai Beverage Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Thai Beverage Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Thai Beverage 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 Thai Beverage

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

The idea behind PT Indofood Sukses and Thai Beverage Public 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.