Correlation Between PT Indofood and ZURICH INSURANCE

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

Diversification Opportunities for PT Indofood and ZURICH INSURANCE

0.68

Correlation Coefficient

PT Indofood  ZURICH INSURANCE

Poor diversification

The 3 months correlation between ISM and ZURICH is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding PT Indofood Sukses and ZURICH INSURANCE GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZURICH INSURANCE 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 ZURICH INSURANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZURICH INSURANCE has no effect on the direction of PT Indofood i.e., PT Indofood and ZURICH INSURANCE go up and down completely randomly.

Pair Corralation between PT Indofood and ZURICH INSURANCE

Assuming the 90 days horizon PT Indofood Sukses is expected to generate 3.8 times more return on investment than ZURICH INSURANCE. However, PT Indofood is 3.8 times more volatile than ZURICH INSURANCE GROUP. It trades about 0.01 of its potential returns per unit of risk. ZURICH INSURANCE GROUP is currently generating about -0.22 per unit of risk. If you would invest  43.00  in PT Indofood Sukses on September 23, 2024 and sell it today you would earn a total of  0.00  from holding PT Indofood Sukses or generate 0.0% 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.  ZURICH INSURANCE GROUP

PT Indofood Sukses

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PT Indofood Sukses are ranked lower than 3 (%) 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.

ZURICH INSURANCE

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ZURICH INSURANCE GROUP are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, ZURICH INSURANCE is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with PT Indofood and ZURICH INSURANCE

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

The idea behind PT Indofood Sukses and ZURICH INSURANCE GROUP 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.