Correlation Between INDOFOOD AGRI and MOLSON COORS

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

Diversification Opportunities for INDOFOOD AGRI and MOLSON COORS

-0.67

Correlation Coefficient

INDOFOOD AGRI  MOLSON COORS

Excellent diversification

The 3 months correlation between INDOFOOD and MOLSON is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding INDOFOOD AGRI RES and MOLSON RS BEVERAGE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MOLSON RS BEVERAGE 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 MOLSON COORS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MOLSON RS BEVERAGE has no effect on the direction of INDOFOOD AGRI i.e., INDOFOOD AGRI and MOLSON COORS go up and down completely randomly.

Pair Corralation between INDOFOOD AGRI and MOLSON COORS

Assuming the 90 days trading horizon INDOFOOD AGRI RES is expected to under-perform the MOLSON COORS. But the stock apears to be less risky and, when comparing its historical volatility, INDOFOOD AGRI RES is 1.47 times less risky than MOLSON COORS. The stock trades about -0.02 of its potential returns per unit of risk. The MOLSON RS BEVERAGE is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  5,513  in MOLSON RS BEVERAGE on December 11, 2024 and sell it today you would earn a total of  1,087  from holding MOLSON RS BEVERAGE or generate 19.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

INDOFOOD AGRI RES  vs.  MOLSON RS BEVERAGE

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

MOLSON RS BEVERAGE

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MOLSON RS BEVERAGE are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, MOLSON COORS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INDOFOOD AGRI and MOLSON COORS

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

The idea behind INDOFOOD AGRI RES and MOLSON RS BEVERAGE 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.