Correlation Between INDOFOOD AGRI and GUARDANT HEALTH

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

Diversification Opportunities for INDOFOOD AGRI and GUARDANT HEALTH

-0.34

Correlation Coefficient

INDOFOOD AGRI  GUARDANT HEALTH

Very good diversification

The 3 months correlation between INDOFOOD and GUARDANT is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding INDOFOOD AGRI RES and GUARDANT HEALTH CL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GUARDANT HEALTH CL 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 GUARDANT HEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GUARDANT HEALTH CL has no effect on the direction of INDOFOOD AGRI i.e., INDOFOOD AGRI and GUARDANT HEALTH go up and down completely randomly.

Pair Corralation between INDOFOOD AGRI and GUARDANT HEALTH

Assuming the 90 days trading horizon INDOFOOD AGRI RES is expected to under-perform the GUARDANT HEALTH. But the stock apears to be less risky and, when comparing its historical volatility, INDOFOOD AGRI RES is 1.84 times less risky than GUARDANT HEALTH. The stock trades about -0.04 of its potential returns per unit of risk. The GUARDANT HEALTH CL is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  3,000  in GUARDANT HEALTH CL on December 2, 2024 and sell it today you would earn a total of  1,034  from holding GUARDANT HEALTH CL or generate 34.47% return on investment over 90 days.

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

INDOFOOD AGRI RES  vs.  GUARDANT HEALTH CL

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 latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

GUARDANT HEALTH CL

Risk-Adjusted Performance

OK

Over the last 90 days GUARDANT HEALTH CL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, GUARDANT HEALTH reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INDOFOOD AGRI and GUARDANT HEALTH

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

The idea behind INDOFOOD AGRI RES and GUARDANT HEALTH CL 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..