Correlation Between PT Indofood and X FAB

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

Diversification Opportunities for PT Indofood and X FAB

-0.39

Correlation Coefficient

PT Indofood  X FAB

Very good diversification

The 3 months correlation between ISM and XFB is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding PT Indofood Sukses and X FAB Silicon Foundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on X FAB Silicon 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 X FAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of X FAB Silicon has no effect on the direction of PT Indofood i.e., PT Indofood and X FAB go up and down completely randomly.

Pair Corralation between PT Indofood and X FAB

Assuming the 90 days horizon PT Indofood Sukses is expected to under-perform the X FAB. But the stock apears to be less risky and, when comparing its historical volatility, PT Indofood Sukses is 1.4 times less risky than X FAB. The stock trades about -0.05 of its potential returns per unit of risk. The X FAB Silicon Foundries is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  450.00  in X FAB Silicon Foundries on September 30, 2024 and sell it today you would earn a total of  51.00  from holding X FAB Silicon Foundries or generate 11.33% return on investment over 90 days.

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

PT Indofood Sukses  vs.  X FAB Silicon Foundries

PT Indofood Sukses

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PT Indofood Sukses are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PT Indofood may actually be approaching a critical reversion point that can send shares even higher in January 2025.

X FAB Silicon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days X FAB Silicon Foundries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, X FAB is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with PT Indofood and X FAB

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

The idea behind PT Indofood Sukses and X FAB Silicon Foundries 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.