Correlation Between Kino Indonesia and PT Indofood

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

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

Diversification Opportunities for Kino Indonesia and PT Indofood

-0.77

Correlation Coefficient

Kino Indonesia  PT Indofood

Pay attention - limited upside

The 3 months correlation between Kino and INDF is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Kino Indonesia Tbk 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 Kino Indonesia 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 Kino Indonesia Tbk 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 Kino Indonesia i.e., Kino Indonesia and PT Indofood go up and down completely randomly.

Pair Corralation between Kino Indonesia and PT Indofood

Assuming the 90 days trading horizon Kino Indonesia Tbk is expected to generate 0.9 times more return on investment than PT Indofood. However, Kino Indonesia Tbk is 1.11 times less risky than PT Indofood. It trades about 0.04 of its potential returns per unit of risk. PT Indofood Sukses is currently generating about -0.15 per unit of risk. If you would invest  120,000  in Kino Indonesia Tbk on October 17, 2024 and sell it today you would earn a total of  1,000.00  from holding Kino Indonesia Tbk or generate 0.83% return on investment over 90 days.

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

Kino Indonesia Tbk  vs.  PT Indofood Sukses

Kino Indonesia Tbk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kino Indonesia Tbk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Kino Indonesia is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

PT Indofood Sukses

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PT Indofood Sukses are ranked lower than 6 (%) 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 February 2025.

Pair Trading with Kino Indonesia and PT Indofood

The main advantage of trading using opposite Kino Indonesia and PT Indofood positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kino Indonesia 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 Kino Indonesia Tbk 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.

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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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.