Correlation Between INDOFOOD AGRI and Deutsche Telekom

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

Diversification Opportunities for INDOFOOD AGRI and Deutsche Telekom

-0.63

Correlation Coefficient

INDOFOOD AGRI  Deutsche Telekom

Excellent diversification

The 3 months correlation between INDOFOOD and Deutsche is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding INDOFOOD AGRI RES and Deutsche Telekom AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Telekom 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 Deutsche Telekom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Telekom has no effect on the direction of INDOFOOD AGRI i.e., INDOFOOD AGRI and Deutsche Telekom go up and down completely randomly.

Pair Corralation between INDOFOOD AGRI and Deutsche Telekom

Assuming the 90 days trading horizon INDOFOOD AGRI RES is expected to under-perform the Deutsche Telekom. In addition to that, INDOFOOD AGRI is 1.59 times more volatile than Deutsche Telekom AG. It trades about -0.02 of its total potential returns per unit of risk. Deutsche Telekom AG is currently generating about 0.19 per unit of volatility. If you would invest  2,884  in Deutsche Telekom AG on December 30, 2024 and sell it today you would earn a total of  530.00  from holding Deutsche Telekom AG or generate 18.38% return on investment over 90 days.

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

INDOFOOD AGRI RES  vs.  Deutsche Telekom AG

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

Deutsche Telekom

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Telekom AG are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Deutsche Telekom reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INDOFOOD AGRI and Deutsche Telekom

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

The idea behind INDOFOOD AGRI RES and Deutsche Telekom AG 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..