Correlation Between Volkswagen and PT Indofood

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

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

Diversification Opportunities for Volkswagen and PT Indofood

-0.66

Correlation Coefficient

Volkswagen  PT Indofood

Excellent diversification

The 3 months correlation between Volkswagen and ISM is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG 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 Volkswagen 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 Volkswagen AG 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 Volkswagen i.e., Volkswagen and PT Indofood go up and down completely randomly.

Pair Corralation between Volkswagen and PT Indofood

Assuming the 90 days horizon Volkswagen AG is expected to generate 0.94 times more return on investment than PT Indofood. However, Volkswagen AG is 1.06 times less risky than PT Indofood. It trades about 0.17 of its potential returns per unit of risk. PT Indofood Sukses is currently generating about -0.12 per unit of risk. If you would invest  8,885  in Volkswagen AG on December 22, 2024 and sell it today you would earn a total of  2,035  from holding Volkswagen AG or generate 22.9% return on investment over 90 days.

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

Volkswagen AG  vs.  PT Indofood Sukses

Volkswagen AG

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Volkswagen AG are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Volkswagen reported solid returns over the last few months and may actually be approaching a breakup point.

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. In spite of uncertain performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Volkswagen and PT Indofood

The main advantage of trading using opposite Volkswagen and PT Indofood positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen 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 Volkswagen AG 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.

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.