Correlation Between Indofood Sukses and Ascot Resources

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

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

Diversification Opportunities for Indofood Sukses and Ascot Resources

0.35

Correlation Coefficient

Indofood Sukses  Ascot Resources

Weak diversification

The 3 months correlation between Indofood and Ascot is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Indofood Sukses Makmur and Ascot Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ascot Resources and Indofood Sukses 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 Indofood Sukses Makmur are associated (or correlated) with Ascot Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ascot Resources has no effect on the direction of Indofood Sukses i.e., Indofood Sukses and Ascot Resources go up and down completely randomly.

Pair Corralation between Indofood Sukses and Ascot Resources

Assuming the 90 days horizon Indofood Sukses Makmur is expected to generate 0.57 times more return on investment than Ascot Resources. However, Indofood Sukses Makmur is 1.76 times less risky than Ascot Resources. It trades about -0.04 of its potential returns per unit of risk. Ascot Resources is currently generating about -0.08 per unit of risk. If you would invest  2,285  in Indofood Sukses Makmur on December 30, 2024 and sell it today you would lose (294.00) from holding Indofood Sukses Makmur or give up 12.87% of portfolio value over 90 days.

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

Indofood Sukses Makmur  vs.  Ascot Resources

Indofood Sukses Makmur

Risk-Adjusted Performance

Very Weak

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

Ascot Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ascot Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Indofood Sukses and Ascot Resources

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

The idea behind Indofood Sukses Makmur and Ascot Resources 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.