Correlation Between INDOFOOD AGRI and FIREWEED METALS

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

Diversification Opportunities for INDOFOOD AGRI and FIREWEED METALS

-0.51

Correlation Coefficient

INDOFOOD AGRI  FIREWEED METALS

Excellent diversification

The 3 months correlation between INDOFOOD and FIREWEED is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding INDOFOOD AGRI RES and FIREWEED METALS P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIREWEED METALS P 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 FIREWEED METALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIREWEED METALS P has no effect on the direction of INDOFOOD AGRI i.e., INDOFOOD AGRI and FIREWEED METALS go up and down completely randomly.

Pair Corralation between INDOFOOD AGRI and FIREWEED METALS

Assuming the 90 days trading horizon INDOFOOD AGRI RES is expected to under-perform the FIREWEED METALS. But the stock apears to be less risky and, when comparing its historical volatility, INDOFOOD AGRI RES is 1.38 times less risky than FIREWEED METALS. The stock trades about -0.02 of its potential returns per unit of risk. The FIREWEED METALS P is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  94.00  in FIREWEED METALS P on December 22, 2024 and sell it today you would earn a total of  11.00  from holding FIREWEED METALS P or generate 11.7% return on investment over 90 days.

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

INDOFOOD AGRI RES  vs.  FIREWEED METALS P

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

FIREWEED METALS P

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FIREWEED METALS P are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, FIREWEED METALS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INDOFOOD AGRI and FIREWEED METALS

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

The idea behind INDOFOOD AGRI RES and FIREWEED METALS P 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.