Correlation Between Indofood Sukses and BRF SA

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

Diversification Opportunities for Indofood Sukses and BRF SA

0.43

Correlation Coefficient

Indofood Sukses  BRF SA

Very weak diversification

The 3 months correlation between Indofood and BRF is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Indofood Sukses Makmur and BRF SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRF SA ADR 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 BRF SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRF SA ADR has no effect on the direction of Indofood Sukses i.e., Indofood Sukses and BRF SA go up and down completely randomly.

Pair Corralation between Indofood Sukses and BRF SA

Assuming the 90 days horizon Indofood Sukses Makmur is expected to generate 1.36 times more return on investment than BRF SA. However, Indofood Sukses is 1.36 times more volatile than BRF SA ADR. It trades about 0.04 of its potential returns per unit of risk. BRF SA ADR is currently generating about 0.0 per unit of risk. If you would invest  1,939  in Indofood Sukses Makmur on December 2, 2024 and sell it today you would earn a total of  361.00  from holding Indofood Sukses Makmur or generate 18.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.76%
Values	Daily Returns

Indofood Sukses Makmur  vs.  BRF SA ADR

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 fairly strong primary indicators, Indofood Sukses is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

BRF SA ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days BRF SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Indofood Sukses and BRF SA

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

The idea behind Indofood Sukses Makmur and BRF SA ADR 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.