Correlation Between INDOFOOD AGRI and DALATA HOTEL

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

Diversification Opportunities for INDOFOOD AGRI and DALATA HOTEL

0.41

Correlation Coefficient

INDOFOOD AGRI  DALATA HOTEL

Very weak diversification

The 3 months correlation between INDOFOOD and DALATA is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding INDOFOOD AGRI RES and DALATA HOTEL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DALATA HOTEL 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 DALATA HOTEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DALATA HOTEL has no effect on the direction of INDOFOOD AGRI i.e., INDOFOOD AGRI and DALATA HOTEL go up and down completely randomly.

Pair Corralation between INDOFOOD AGRI and DALATA HOTEL

Assuming the 90 days trading horizon INDOFOOD AGRI RES is expected to under-perform the DALATA HOTEL. But the stock apears to be less risky and, when comparing its historical volatility, INDOFOOD AGRI RES is 1.36 times less risky than DALATA HOTEL. The stock trades about -0.03 of its potential returns per unit of risk. The DALATA HOTEL is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  404.00  in DALATA HOTEL on October 6, 2024 and sell it today you would earn a total of  39.00  from holding DALATA HOTEL or generate 9.65% 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.  DALATA HOTEL

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

DALATA HOTEL

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DALATA HOTEL are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, DALATA HOTEL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with INDOFOOD AGRI and DALATA HOTEL

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

The idea behind INDOFOOD AGRI RES and DALATA HOTEL 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.