Correlation Between PT Indofood and United Natural

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

Diversification Opportunities for PT Indofood and United Natural

0.08

Correlation Coefficient

PT Indofood  United Natural

Significant diversification

The 3 months correlation between ISM and United is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding PT Indofood Sukses and United Natural Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Natural Foods 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 United Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Natural Foods has no effect on the direction of PT Indofood i.e., PT Indofood and United Natural go up and down completely randomly.

Pair Corralation between PT Indofood and United Natural

Assuming the 90 days horizon PT Indofood Sukses is expected to under-perform the United Natural. But the stock apears to be less risky and, when comparing its historical volatility, PT Indofood Sukses is 1.3 times less risky than United Natural. The stock trades about -0.01 of its potential returns per unit of risk. The United Natural Foods is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,290  in United Natural Foods on November 29, 2024 and sell it today you would earn a total of  646.00  from holding United Natural Foods or generate 28.21% return on investment over 90 days.

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

PT Indofood Sukses  vs.  United Natural Foods

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.

United Natural Foods

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Natural Foods are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, United Natural reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Indofood and United Natural

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

The idea behind PT Indofood Sukses and United Natural Foods 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.

Check out your portfolio center.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.