Correlation Between INDOFOOD AGRI and CSSC Offshore

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

Diversification Opportunities for INDOFOOD AGRI and CSSC Offshore

-0.39

Correlation Coefficient

INDOFOOD AGRI  CSSC Offshore

Very good diversification

The 3 months correlation between INDOFOOD and CSSC is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding INDOFOOD AGRI RES and CSSC Offshore Marine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSSC Offshore Marine 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 CSSC Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSSC Offshore Marine has no effect on the direction of INDOFOOD AGRI i.e., INDOFOOD AGRI and CSSC Offshore go up and down completely randomly.

Pair Corralation between INDOFOOD AGRI and CSSC Offshore

Assuming the 90 days trading horizon INDOFOOD AGRI is expected to generate 2.61 times less return on investment than CSSC Offshore. But when comparing it to its historical volatility, INDOFOOD AGRI RES is 1.42 times less risky than CSSC Offshore. It trades about 0.02 of its potential returns per unit of risk. CSSC Offshore Marine is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  86.00  in CSSC Offshore Marine on September 26, 2024 and sell it today you would earn a total of  49.00  from holding CSSC Offshore Marine or generate 56.98% 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.  CSSC Offshore Marine

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

CSSC Offshore Marine

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CSSC Offshore Marine has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, CSSC Offshore is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with INDOFOOD AGRI and CSSC Offshore

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

The idea behind INDOFOOD AGRI RES and CSSC Offshore Marine 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.