Correlation Between Sterling Construction and PT Indofood

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

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

Diversification Opportunities for Sterling Construction and PT Indofood

0.36

Correlation Coefficient

Sterling Construction  PT Indofood

Weak diversification

The 3 months correlation between Sterling and ISM is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction 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 Sterling Construction 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 Sterling Construction 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 Sterling Construction i.e., Sterling Construction and PT Indofood go up and down completely randomly.

Pair Corralation between Sterling Construction and PT Indofood

Assuming the 90 days horizon Sterling Construction is expected to under-perform the PT Indofood. In addition to that, Sterling Construction is 1.12 times more volatile than PT Indofood Sukses. It trades about -0.11 of its total potential returns per unit of risk. PT Indofood Sukses is currently generating about -0.03 per unit of volatility. If you would invest  44.00  in PT Indofood Sukses on December 29, 2024 and sell it today you would lose (6.00) from holding PT Indofood Sukses or give up 13.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Sterling Construction  vs.  PT Indofood Sukses

Sterling Construction

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sterling Construction has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

PT Indofood Sukses

Risk-Adjusted Performance

Very Weak

Over the last 90 days PT Indofood Sukses has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady 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 Sterling Construction and PT Indofood

The main advantage of trading using opposite Sterling Construction and PT Indofood positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Construction 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 Sterling Construction 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.