Correlation Between INDOFOOD AGRI and HF FOODS

Can any of the company-specific risk be diversified away by investing in both INDOFOOD AGRI and HF FOODS 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 HF FOODS 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 HF FOODS GRP, you can compare the effects of market volatilities on INDOFOOD AGRI and HF FOODS 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 HF FOODS. Check out your portfolio center. Please also check ongoing floating volatility patterns of INDOFOOD AGRI and HF FOODS.

Diversification Opportunities for INDOFOOD AGRI and HF FOODS

0.49

Correlation Coefficient

INDOFOOD AGRI  HF FOODS

Very weak diversification

The 3 months correlation between INDOFOOD and 3GX is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding INDOFOOD AGRI RES and HF FOODS GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HF FOODS GRP 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 HF FOODS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HF FOODS GRP has no effect on the direction of INDOFOOD AGRI i.e., INDOFOOD AGRI and HF FOODS go up and down completely randomly.

Pair Corralation between INDOFOOD AGRI and HF FOODS

Assuming the 90 days trading horizon INDOFOOD AGRI RES is expected to generate 0.54 times more return on investment than HF FOODS. However, INDOFOOD AGRI RES is 1.85 times less risky than HF FOODS. It trades about 0.02 of its potential returns per unit of risk. HF FOODS GRP is currently generating about 0.01 per unit of risk. If you would invest  19.00  in INDOFOOD AGRI RES on September 26, 2024 and sell it today you would earn a total of  3.00  from holding INDOFOOD AGRI RES or generate 15.79% return on investment over 90 days.

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

INDOFOOD AGRI RES  vs.  HF FOODS GRP

INDOFOOD AGRI RES

Risk-Adjusted Performance

0 of 100

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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

HF FOODS GRP

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HF FOODS GRP are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, HF FOODS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with INDOFOOD AGRI and HF FOODS

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

The idea behind INDOFOOD AGRI RES and HF FOODS GRP 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.