Correlation Between PT Indofood and Emera Maine

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

Diversification Opportunities for PT Indofood and Emera Maine

-0.52

Correlation Coefficient

PT Indofood  Emera Maine

Excellent diversification

The 3 months correlation between PIFMF and Emera is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding PT Indofood Sukses and Emera Maine PFD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emera Maine PFD 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 Emera Maine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emera Maine PFD has no effect on the direction of PT Indofood i.e., PT Indofood and Emera Maine go up and down completely randomly.

Pair Corralation between PT Indofood and Emera Maine

Assuming the 90 days horizon PT Indofood Sukses is expected to under-perform the Emera Maine. In addition to that, PT Indofood is 9.15 times more volatile than Emera Maine PFD. It trades about -0.02 of its total potential returns per unit of risk. Emera Maine PFD is currently generating about 0.1 per unit of volatility. If you would invest  9,650  in Emera Maine PFD on September 27, 2024 and sell it today you would earn a total of  175.00  from holding Emera Maine PFD or generate 1.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	29.97%
Values	Daily Returns

PT Indofood Sukses  vs.  Emera Maine PFD

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Emera Maine PFD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Emera Maine PFD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Emera Maine is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with PT Indofood and Emera Maine

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

The idea behind PT Indofood Sukses and Emera Maine PFD 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.