Correlation Between INDOFOOD AGRI and RBC Bearings

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

Diversification Opportunities for INDOFOOD AGRI and RBC Bearings

-0.37

Correlation Coefficient

INDOFOOD AGRI  RBC Bearings

Very good diversification

The 3 months correlation between INDOFOOD and RBC is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding INDOFOOD AGRI RES and RBC Bearings Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Bearings 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 RBC Bearings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Bearings has no effect on the direction of INDOFOOD AGRI i.e., INDOFOOD AGRI and RBC Bearings go up and down completely randomly.

Pair Corralation between INDOFOOD AGRI and RBC Bearings

Assuming the 90 days trading horizon INDOFOOD AGRI RES is expected to under-perform the RBC Bearings. In addition to that, INDOFOOD AGRI is 1.16 times more volatile than RBC Bearings Incorporated. It trades about -0.06 of its total potential returns per unit of risk. RBC Bearings Incorporated is currently generating about 0.05 per unit of volatility. If you would invest  29,400  in RBC Bearings Incorporated on December 21, 2024 and sell it today you would earn a total of  1,600  from holding RBC Bearings Incorporated or generate 5.44% 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.  RBC Bearings Incorporated

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 uncertain 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.

RBC Bearings

Risk-Adjusted Performance

Insignificant

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

Pair Trading with INDOFOOD AGRI and RBC Bearings

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

The idea behind INDOFOOD AGRI RES and RBC Bearings Incorporated 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.