Correlation Between INDOFOOD AGRI and MONGOLIAN MINING

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

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

Diversification Opportunities for INDOFOOD AGRI and MONGOLIAN MINING

0.72

Correlation Coefficient

INDOFOOD AGRI  MONGOLIAN MINING

Poor diversification

The 3 months correlation between INDOFOOD and MONGOLIAN is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding INDOFOOD AGRI RES and MONGOLIAN MINING CRPREGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MONGOLIAN MINING CRPREGS and INDOFOOD AGRI 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 INDOFOOD AGRI RES are associated (or correlated) with MONGOLIAN MINING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MONGOLIAN MINING CRPREGS has no effect on the direction of INDOFOOD AGRI i.e., INDOFOOD AGRI and MONGOLIAN MINING go up and down completely randomly.

Pair Corralation between INDOFOOD AGRI and MONGOLIAN MINING

Assuming the 90 days trading horizon INDOFOOD AGRI RES is expected to generate 0.74 times more return on investment than MONGOLIAN MINING. However, INDOFOOD AGRI RES is 1.35 times less risky than MONGOLIAN MINING. It trades about -0.02 of its potential returns per unit of risk. MONGOLIAN MINING CRPREGS is currently generating about -0.13 per unit of risk. If you would invest  22.00  in INDOFOOD AGRI RES on December 23, 2024 and sell it today you would lose (1.00) from holding INDOFOOD AGRI RES or give up 4.55% of portfolio value over 90 days.

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

INDOFOOD AGRI RES  vs.  MONGOLIAN MINING CRPREGS

INDOFOOD AGRI RES

Risk-Adjusted Performance

Very Weak

Over the last 90 days INDOFOOD AGRI RES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, INDOFOOD AGRI is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

MONGOLIAN MINING CRPREGS

Risk-Adjusted Performance

Very Weak

Over the last 90 days MONGOLIAN MINING CRPREGS 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.

Pair Trading with INDOFOOD AGRI and MONGOLIAN MINING

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

The idea behind INDOFOOD AGRI RES and MONGOLIAN MINING CRPREGS 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.