Correlation Between Indofood Sukses and GAMCO Natural

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

Diversification Opportunities for Indofood Sukses and GAMCO Natural

-0.52

Correlation Coefficient

Indofood Sukses  GAMCO Natural

Excellent diversification

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

Pair Corralation between Indofood Sukses and GAMCO Natural

Assuming the 90 days horizon Indofood Sukses Makmur is expected to generate 3.78 times more return on investment than GAMCO Natural. However, Indofood Sukses is 3.78 times more volatile than GAMCO Natural Resources. It trades about 0.02 of its potential returns per unit of risk. GAMCO Natural Resources is currently generating about 0.01 per unit of risk. If you would invest  2,217  in Indofood Sukses Makmur on October 3, 2024 and sell it today you would earn a total of  68.00  from holding Indofood Sukses Makmur or generate 3.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Indofood Sukses Makmur  vs.  GAMCO Natural Resources

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

GAMCO Natural Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GAMCO Natural Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Preferred 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 Indofood Sukses and GAMCO Natural

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

The idea behind Indofood Sukses Makmur and GAMCO Natural 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.