Correlation Between Jakarta Int and PT Indofood

Can any of the company-specific risk be diversified away by investing in both Jakarta Int and PT Indofood 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 Jakarta Int and PT Indofood into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Jakarta Int Hotels and PT Indofood Sukses, you can compare the effects of market volatilities on Jakarta Int and PT Indofood 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 Jakarta Int with a short position of PT Indofood. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jakarta Int and PT Indofood.

Diversification Opportunities for Jakarta Int and PT Indofood

0.67

Correlation Coefficient

Jakarta Int  PT Indofood

Poor diversification

The 3 months correlation between Jakarta and INDF is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Jakarta Int Hotels and PT Indofood Sukses in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Indofood Sukses and Jakarta Int 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 Jakarta Int Hotels are associated (or correlated) with PT Indofood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Indofood Sukses has no effect on the direction of Jakarta Int i.e., Jakarta Int and PT Indofood go up and down completely randomly.

Pair Corralation between Jakarta Int and PT Indofood

Assuming the 90 days trading horizon Jakarta Int Hotels is expected to generate 5.7 times more return on investment than PT Indofood. However, Jakarta Int is 5.7 times more volatile than PT Indofood Sukses. It trades about 0.44 of its potential returns per unit of risk. PT Indofood Sukses is currently generating about 0.12 per unit of risk. If you would invest  33,200  in Jakarta Int Hotels on September 1, 2024 and sell it today you would earn a total of  263,800  from holding Jakarta Int Hotels or generate 794.58% return on investment over 90 days.

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

Jakarta Int Hotels  vs.  PT Indofood Sukses

Jakarta Int Hotels

Risk-Adjusted Performance

34 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Jakarta Int Hotels are ranked lower than 34 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Jakarta Int disclosed solid returns over the last few months and may actually be approaching a breakup point.

PT Indofood Sukses

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PT Indofood Sukses are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, PT Indofood may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Jakarta Int and PT Indofood

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

The idea behind Jakarta Int Hotels and PT Indofood Sukses 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.