Correlation Between Ultra Jaya and Japfa Comfeed

Can any of the company-specific risk be diversified away by investing in both Ultra Jaya and Japfa Comfeed 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 Ultra Jaya and Japfa Comfeed into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ultra Jaya Milk and Japfa Comfeed Indonesia, you can compare the effects of market volatilities on Ultra Jaya and Japfa Comfeed 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 Ultra Jaya with a short position of Japfa Comfeed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultra Jaya and Japfa Comfeed.

Diversification Opportunities for Ultra Jaya and Japfa Comfeed

-0.74

Correlation Coefficient

Ultra Jaya  Japfa Comfeed

Pay attention - limited upside

The 3 months correlation between Ultra and Japfa is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Jaya Milk and Japfa Comfeed Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japfa Comfeed Indonesia and Ultra Jaya 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 Ultra Jaya Milk are associated (or correlated) with Japfa Comfeed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japfa Comfeed Indonesia has no effect on the direction of Ultra Jaya i.e., Ultra Jaya and Japfa Comfeed go up and down completely randomly.

Pair Corralation between Ultra Jaya and Japfa Comfeed

Assuming the 90 days trading horizon Ultra Jaya is expected to generate 6.16 times less return on investment than Japfa Comfeed. But when comparing it to its historical volatility, Ultra Jaya Milk is 1.18 times less risky than Japfa Comfeed. It trades about 0.02 of its potential returns per unit of risk. Japfa Comfeed Indonesia is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  114,288  in Japfa Comfeed Indonesia on September 28, 2024 and sell it today you would earn a total of  74,712  from holding Japfa Comfeed Indonesia or generate 65.37% return on investment over 90 days.

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

Ultra Jaya Milk  vs.  Japfa Comfeed Indonesia

Ultra Jaya Milk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ultra Jaya Milk has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Japfa Comfeed Indonesia

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Japfa Comfeed Indonesia are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Japfa Comfeed disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ultra Jaya and Japfa Comfeed

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

The idea behind Ultra Jaya Milk and Japfa Comfeed Indonesia 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.