Correlation Between Evolution Mining and INDOFOOD AGRI

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

By analyzing existing cross correlation between Evolution Mining Limited and INDOFOOD AGRI RES, you can compare the effects of market volatilities on Evolution Mining and INDOFOOD AGRI 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 Evolution Mining with a short position of INDOFOOD AGRI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evolution Mining and INDOFOOD AGRI.

Diversification Opportunities for Evolution Mining and INDOFOOD AGRI

0.27

Correlation Coefficient

Evolution Mining  INDOFOOD AGRI

Modest diversification

The 3 months correlation between Evolution and INDOFOOD is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Evolution Mining Limited and INDOFOOD AGRI RES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INDOFOOD AGRI RES and Evolution Mining 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 Evolution Mining Limited are associated (or correlated) with INDOFOOD AGRI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INDOFOOD AGRI RES has no effect on the direction of Evolution Mining i.e., Evolution Mining and INDOFOOD AGRI go up and down completely randomly.

Pair Corralation between Evolution Mining and INDOFOOD AGRI

Assuming the 90 days horizon Evolution Mining Limited is expected to under-perform the INDOFOOD AGRI. In addition to that, Evolution Mining is 1.06 times more volatile than INDOFOOD AGRI RES. It trades about -0.12 of its total potential returns per unit of risk. INDOFOOD AGRI RES is currently generating about 0.01 per unit of volatility. If you would invest  22.00  in INDOFOOD AGRI RES on September 23, 2024 and sell it today you would earn a total of  0.00  from holding INDOFOOD AGRI RES or generate 0.0% return on investment over 90 days.

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

Evolution Mining Limited  vs.  INDOFOOD AGRI RES

Evolution Mining

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Evolution Mining Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Evolution Mining may actually be approaching a critical reversion point that can send shares even higher in January 2025.

INDOFOOD AGRI RES

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in INDOFOOD AGRI RES are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, INDOFOOD AGRI is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Evolution Mining and INDOFOOD AGRI

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

The idea behind Evolution Mining Limited and INDOFOOD AGRI RES 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.