Correlation Between Major Drilling and INDOFOOD AGRI
Can any of the company-specific risk be diversified away by investing in both Major Drilling 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 Major Drilling and INDOFOOD AGRI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Major Drilling Group and INDOFOOD AGRI RES, you can compare the effects of market volatilities on Major Drilling 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 Major Drilling with a short position of INDOFOOD AGRI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Major Drilling and INDOFOOD AGRI.
Diversification Opportunities for Major Drilling and INDOFOOD AGRI
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Major and INDOFOOD is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group 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 Major Drilling 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 Major Drilling Group 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 Major Drilling i.e., Major Drilling and INDOFOOD AGRI go up and down completely randomly.
Pair Corralation between Major Drilling and INDOFOOD AGRI
Assuming the 90 days horizon Major Drilling is expected to generate 1.59 times less return on investment than INDOFOOD AGRI. In addition to that, Major Drilling is 1.04 times more volatile than INDOFOOD AGRI RES. It trades about 0.06 of its total potential returns per unit of risk. INDOFOOD AGRI RES is currently generating about 0.09 per unit of volatility. If you would invest 21.00 in INDOFOOD AGRI RES on August 29, 2024 and sell it today you would earn a total of 1.00 from holding INDOFOOD AGRI RES or generate 4.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Major Drilling Group vs. INDOFOOD AGRI RES
Performance |
| Timeline |
| Major Drilling Group |
| INDOFOOD AGRI RES |
Major Drilling and INDOFOOD AGRI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Major Drilling and INDOFOOD AGRI
The main advantage of trading using opposite Major Drilling and INDOFOOD AGRI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Major Drilling 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.| Major Drilling vs. Superior Plus Corp | Major Drilling vs. NMI Holdings | Major Drilling vs. Origin Agritech | Major Drilling vs. SIVERS SEMICONDUCTORS AB |
| INDOFOOD AGRI vs. Apple Inc | INDOFOOD AGRI vs. Apple Inc | INDOFOOD AGRI vs. Microsoft | INDOFOOD AGRI vs. Microsoft |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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