Correlation Between Lion Biotechnologies and INDOFOOD AGRI
Can any of the company-specific risk be diversified away by investing in both Lion Biotechnologies and INDOFOOD AGRI 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 Lion Biotechnologies and INDOFOOD AGRI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lion Biotechnologies and INDOFOOD AGRI RES, you can compare the effects of market volatilities on Lion Biotechnologies and INDOFOOD AGRI 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 Lion Biotechnologies with a short position of INDOFOOD AGRI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lion Biotechnologies and INDOFOOD AGRI.
Diversification Opportunities for Lion Biotechnologies and INDOFOOD AGRI
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Lion and INDOFOOD is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Lion Biotechnologies and INDOFOOD AGRI RES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INDOFOOD AGRI RES and Lion Biotechnologies 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 Lion Biotechnologies are associated (or correlated) with INDOFOOD AGRI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INDOFOOD AGRI RES has no effect on the direction of Lion Biotechnologies i.e., Lion Biotechnologies and INDOFOOD AGRI go up and down completely randomly.
Pair Corralation between Lion Biotechnologies and INDOFOOD AGRI
Assuming the 90 days trading horizon Lion Biotechnologies is expected to generate 2.73 times more return on investment than INDOFOOD AGRI. However, Lion Biotechnologies is 2.73 times more volatile than INDOFOOD AGRI RES. It trades about 0.04 of its potential returns per unit of risk. INDOFOOD AGRI RES is currently generating about 0.03 per unit of risk. If you would invest 735.00 in Lion Biotechnologies on September 1, 2024 and sell it today you would earn a total of 165.00 from holding Lion Biotechnologies or generate 22.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lion Biotechnologies vs. INDOFOOD AGRI RES
Performance |
| Timeline |
| Lion Biotechnologies |
| INDOFOOD AGRI RES |
Lion Biotechnologies and INDOFOOD AGRI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lion Biotechnologies and INDOFOOD AGRI
The main advantage of trading using opposite Lion Biotechnologies and INDOFOOD AGRI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lion Biotechnologies position performs unexpectedly, INDOFOOD AGRI 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 INDOFOOD AGRI will offset losses from the drop in INDOFOOD AGRI's long position.| Lion Biotechnologies vs. NIPPON STEEL SPADR | Lion Biotechnologies vs. Cleanaway Waste Management | Lion Biotechnologies vs. Pembina Pipeline Corp | Lion Biotechnologies vs. CosmoSteel Holdings Limited |
| INDOFOOD AGRI vs. Playtech plc | INDOFOOD AGRI vs. GungHo Online Entertainment | INDOFOOD AGRI vs. TAL Education Group | INDOFOOD AGRI vs. CarsalesCom |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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