Correlation Between INDOFOOD AGRI and Goldman Sachs

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

Diversification Opportunities for INDOFOOD AGRI and Goldman Sachs

0.44

Correlation Coefficient

INDOFOOD AGRI  Goldman Sachs

Very weak diversification

The 3 months correlation between INDOFOOD and Goldman is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding INDOFOOD AGRI RES and The Goldman Sachs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs 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 Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs has no effect on the direction of INDOFOOD AGRI i.e., INDOFOOD AGRI and Goldman Sachs go up and down completely randomly.

Pair Corralation between INDOFOOD AGRI and Goldman Sachs

Assuming the 90 days trading horizon INDOFOOD AGRI is expected to generate 4.88 times less return on investment than Goldman Sachs. But when comparing it to its historical volatility, INDOFOOD AGRI RES is 1.34 times less risky than Goldman Sachs. It trades about 0.05 of its potential returns per unit of risk. The Goldman Sachs is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  47,303  in The Goldman Sachs on October 26, 2024 and sell it today you would earn a total of  14,297  from holding The Goldman Sachs or generate 30.22% 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.  The Goldman Sachs

INDOFOOD AGRI RES

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in INDOFOOD AGRI RES are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Goldman Sachs

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with INDOFOOD AGRI and Goldman Sachs

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

The idea behind INDOFOOD AGRI RES and The Goldman Sachs 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.