Correlation Between INDOFOOD AGRI and OtelloASA

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

Diversification Opportunities for INDOFOOD AGRI and OtelloASA

0.23

Correlation Coefficient

INDOFOOD AGRI  OtelloASA

Modest diversification

The 3 months correlation between INDOFOOD and OtelloASA is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding INDOFOOD AGRI RES and Otello ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Otello ASA 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 OtelloASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Otello ASA has no effect on the direction of INDOFOOD AGRI i.e., INDOFOOD AGRI and OtelloASA go up and down completely randomly.

Pair Corralation between INDOFOOD AGRI and OtelloASA

Assuming the 90 days trading horizon INDOFOOD AGRI RES is expected to under-perform the OtelloASA. In addition to that, INDOFOOD AGRI is 1.45 times more volatile than Otello ASA. It trades about -0.02 of its total potential returns per unit of risk. Otello ASA is currently generating about 0.11 per unit of volatility. If you would invest  63.00  in Otello ASA on December 23, 2024 and sell it today you would earn a total of  7.00  from holding Otello ASA or generate 11.11% return on investment over 90 days.

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

INDOFOOD AGRI RES  vs.  Otello ASA

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.

Otello ASA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Otello ASA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, OtelloASA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with INDOFOOD AGRI and OtelloASA

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

The idea behind INDOFOOD AGRI RES and Otello ASA 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.

Check out your portfolio center.

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.