Correlation Between Indofood Sukses and Toyo Suisan

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

Diversification Opportunities for Indofood Sukses and Toyo Suisan

0.25

Correlation Coefficient

Indofood Sukses  Toyo Suisan

Modest diversification

The 3 months correlation between Indofood and Toyo is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Indofood Sukses Makmur and Toyo Suisan Kaisha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toyo Suisan Kaisha 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 Toyo Suisan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toyo Suisan Kaisha has no effect on the direction of Indofood Sukses i.e., Indofood Sukses and Toyo Suisan go up and down completely randomly.

Pair Corralation between Indofood Sukses and Toyo Suisan

Assuming the 90 days horizon Indofood Sukses Makmur is expected to generate 1.09 times more return on investment than Toyo Suisan. However, Indofood Sukses is 1.09 times more volatile than Toyo Suisan Kaisha. It trades about -0.01 of its potential returns per unit of risk. Toyo Suisan Kaisha is currently generating about -0.07 per unit of risk. If you would invest  2,489  in Indofood Sukses Makmur on December 1, 2024 and sell it today you would lose (189.00) from holding Indofood Sukses Makmur or give up 7.59% 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.  Toyo Suisan Kaisha

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.

Toyo Suisan Kaisha

Risk-Adjusted Performance

Very Weak

Over the last 90 days Toyo Suisan Kaisha 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 forward-looking signals remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Indofood Sukses and Toyo Suisan

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

The idea behind Indofood Sukses Makmur and Toyo Suisan Kaisha 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.