Correlation Between INDOFOOD AGRI and Tokyo Gas

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

Diversification Opportunities for INDOFOOD AGRI and Tokyo Gas

-0.52

Correlation Coefficient

INDOFOOD AGRI  Tokyo Gas

Excellent diversification

The 3 months correlation between INDOFOOD and Tokyo is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding INDOFOOD AGRI RES and Tokyo Gas CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokyo Gas CoLtd 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 Tokyo Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokyo Gas CoLtd has no effect on the direction of INDOFOOD AGRI i.e., INDOFOOD AGRI and Tokyo Gas go up and down completely randomly.

Pair Corralation between INDOFOOD AGRI and Tokyo Gas

Assuming the 90 days trading horizon INDOFOOD AGRI RES is expected to under-perform the Tokyo Gas. In addition to that, INDOFOOD AGRI is 1.23 times more volatile than Tokyo Gas CoLtd. It trades about -0.02 of its total potential returns per unit of risk. Tokyo Gas CoLtd is currently generating about 0.13 per unit of volatility. If you would invest  2,640  in Tokyo Gas CoLtd on December 21, 2024 and sell it today you would earn a total of  400.00  from holding Tokyo Gas CoLtd or generate 15.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

INDOFOOD AGRI RES  vs.  Tokyo Gas CoLtd

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.

Tokyo Gas CoLtd

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tokyo Gas CoLtd are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Tokyo Gas reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INDOFOOD AGRI and Tokyo Gas

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

The idea behind INDOFOOD AGRI RES and Tokyo Gas CoLtd 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.