Correlation Between Stag Industrial and PT Indofood

Can any of the company-specific risk be diversified away by investing in both Stag Industrial and PT Indofood 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 Stag Industrial and PT Indofood into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Stag Industrial and PT Indofood Sukses, you can compare the effects of market volatilities on Stag Industrial and PT Indofood 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 Stag Industrial with a short position of PT Indofood. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stag Industrial and PT Indofood.

Diversification Opportunities for Stag Industrial and PT Indofood

-0.08

Correlation Coefficient

Stag Industrial  PT Indofood

Good diversification

The 3 months correlation between Stag and ISM is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Stag Industrial and PT Indofood Sukses in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Indofood Sukses and Stag Industrial 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 Stag Industrial are associated (or correlated) with PT Indofood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Indofood Sukses has no effect on the direction of Stag Industrial i.e., Stag Industrial and PT Indofood go up and down completely randomly.

Pair Corralation between Stag Industrial and PT Indofood

Assuming the 90 days trading horizon Stag Industrial is expected to under-perform the PT Indofood. But the stock apears to be less risky and, when comparing its historical volatility, Stag Industrial is 2.81 times less risky than PT Indofood. The stock trades about -0.01 of its potential returns per unit of risk. The PT Indofood Sukses is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  36.00  in PT Indofood Sukses on October 9, 2024 and sell it today you would earn a total of  10.00  from holding PT Indofood Sukses or generate 27.78% return on investment over 90 days.

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

Stag Industrial  vs.  PT Indofood Sukses

Stag Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stag Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Stag Industrial is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

PT Indofood Sukses

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PT Indofood Sukses are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, PT Indofood reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stag Industrial and PT Indofood

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

The idea behind Stag Industrial and PT Indofood Sukses 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.