Correlation Between INDOFOOD AGRI and Sun Art

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

Diversification Opportunities for INDOFOOD AGRI and Sun Art

-0.1

Correlation Coefficient

INDOFOOD AGRI  Sun Art

Good diversification

The 3 months correlation between INDOFOOD and Sun is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding INDOFOOD AGRI RES and Sun Art Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Art Retail 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 Sun Art. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Art Retail has no effect on the direction of INDOFOOD AGRI i.e., INDOFOOD AGRI and Sun Art go up and down completely randomly.

Pair Corralation between INDOFOOD AGRI and Sun Art

Assuming the 90 days trading horizon INDOFOOD AGRI RES is expected to generate 0.37 times more return on investment than Sun Art. However, INDOFOOD AGRI RES is 2.67 times less risky than Sun Art. It trades about 0.01 of its potential returns per unit of risk. Sun Art Retail is currently generating about -0.3 per unit of risk. If you would invest  22.00  in INDOFOOD AGRI RES on October 26, 2024 and sell it today you would earn a total of  0.00  from holding INDOFOOD AGRI RES or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

INDOFOOD AGRI RES  vs.  Sun Art Retail

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.

Sun Art Retail

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Art Retail are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sun Art reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INDOFOOD AGRI and Sun Art

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

The idea behind INDOFOOD AGRI RES and Sun Art Retail 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.