Correlation Between Indofood Sukses and Fujitsu

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

Diversification Opportunities for Indofood Sukses and Fujitsu

-0.32

Correlation Coefficient

Indofood Sukses  Fujitsu

Very good diversification

The 3 months correlation between Indofood and Fujitsu is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Indofood Sukses Makmur and Fujitsu Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fujitsu Limited 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 Fujitsu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fujitsu Limited has no effect on the direction of Indofood Sukses i.e., Indofood Sukses and Fujitsu go up and down completely randomly.

Pair Corralation between Indofood Sukses and Fujitsu

Assuming the 90 days horizon Indofood Sukses is expected to generate 2.89 times less return on investment than Fujitsu. But when comparing it to its historical volatility, Indofood Sukses Makmur is 1.51 times less risky than Fujitsu. It trades about 0.02 of its potential returns per unit of risk. Fujitsu Limited is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,261  in Fujitsu Limited on October 7, 2024 and sell it today you would earn a total of  384.00  from holding Fujitsu Limited or generate 30.45% return on investment over 90 days.

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

Indofood Sukses Makmur  vs.  Fujitsu Limited

Indofood Sukses Makmur

Risk-Adjusted Performance

0 of 100

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 latest stock price disturbance, may contribute to short-term losses for the investors.

Fujitsu Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fujitsu Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Indofood Sukses and Fujitsu

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

The idea behind Indofood Sukses Makmur and Fujitsu Limited 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.

Check out your portfolio center.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.