Correlation Between Indofood Sukses and NICK Old

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

Diversification Opportunities for Indofood Sukses and NICK Old

0.0

Correlation Coefficient

Indofood Sukses  NICK Old

Pay attention - limited upside

The 3 months correlation between Indofood and NICK is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Indofood Sukses Makmur and NICK Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NICK Old 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 NICK Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NICK Old has no effect on the direction of Indofood Sukses i.e., Indofood Sukses and NICK Old go up and down completely randomly.

Pair Corralation between Indofood Sukses and NICK Old

If you would invest  2,285  in Indofood Sukses Makmur on December 27, 2024 and sell it today you would lose (90.00) from holding Indofood Sukses Makmur or give up 3.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Indofood Sukses Makmur  vs.  NICK Old

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.

NICK Old

Risk-Adjusted Performance

Very Weak

Over the last 90 days NICK Old has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, NICK Old is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Indofood Sukses and NICK Old

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

The idea behind Indofood Sukses Makmur and NICK Old 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.