Correlation Between PT Indofood and Air Liquide

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

Diversification Opportunities for PT Indofood and Air Liquide

0.83

Correlation Coefficient

PT Indofood  Air Liquide

Very poor diversification

The 3 months correlation between PIFMF and Air is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding PT Indofood Sukses and Air Liquide SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Liquide SA 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 Air Liquide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Liquide SA has no effect on the direction of PT Indofood i.e., PT Indofood and Air Liquide go up and down completely randomly.

Pair Corralation between PT Indofood and Air Liquide

Assuming the 90 days horizon PT Indofood Sukses is expected to generate 0.35 times more return on investment than Air Liquide. However, PT Indofood Sukses is 2.88 times less risky than Air Liquide. It trades about -0.2 of its potential returns per unit of risk. Air Liquide SA is currently generating about -0.09 per unit of risk. If you would invest  40.00  in PT Indofood Sukses on September 1, 2024 and sell it today you would lose (1.00) from holding PT Indofood Sukses or give up 2.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	19.84%
Values	Daily Returns

PT Indofood Sukses  vs.  Air Liquide SA

PT Indofood Sukses

Risk-Adjusted Performance

0 of 100

Very 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 primary indicators, PT Indofood is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Air Liquide SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Air Liquide SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with PT Indofood and Air Liquide

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

The idea behind PT Indofood Sukses and Air Liquide SA 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.