Correlation Between INDOFOOD AGRI and PENN Entertainment

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

Diversification Opportunities for INDOFOOD AGRI and PENN Entertainment

0.2

Correlation Coefficient

INDOFOOD AGRI  PENN Entertainment

Modest diversification

The 3 months correlation between INDOFOOD and PENN is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding INDOFOOD AGRI RES and PENN Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PENN Entertainment 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 PENN Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PENN Entertainment has no effect on the direction of INDOFOOD AGRI i.e., INDOFOOD AGRI and PENN Entertainment go up and down completely randomly.

Pair Corralation between INDOFOOD AGRI and PENN Entertainment

Assuming the 90 days trading horizon INDOFOOD AGRI is expected to generate 1.22 times less return on investment than PENN Entertainment. But when comparing it to its historical volatility, INDOFOOD AGRI RES is 1.6 times less risky than PENN Entertainment. It trades about 0.05 of its potential returns per unit of risk. PENN Entertainment is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,819  in PENN Entertainment on October 26, 2024 and sell it today you would earn a total of  76.00  from holding PENN Entertainment or generate 4.18% 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.  PENN Entertainment

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.

PENN Entertainment

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PENN Entertainment are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, PENN Entertainment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with INDOFOOD AGRI and PENN Entertainment

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

The idea behind INDOFOOD AGRI RES and PENN Entertainment 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.