Correlation Between FKS Food and Polychem Indonesia
Can any of the company-specific risk be diversified away by investing in both FKS Food and Polychem Indonesia 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 FKS Food and Polychem Indonesia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FKS Food Sejahtera and Polychem Indonesia Tbk, you can compare the effects of market volatilities on FKS Food and Polychem Indonesia 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 FKS Food with a short position of Polychem Indonesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of FKS Food and Polychem Indonesia.
Diversification Opportunities for FKS Food and Polychem Indonesia
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FKS and Polychem is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding FKS Food Sejahtera and Polychem Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polychem Indonesia Tbk and FKS Food 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 FKS Food Sejahtera are associated (or correlated) with Polychem Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polychem Indonesia Tbk has no effect on the direction of FKS Food i.e., FKS Food and Polychem Indonesia go up and down completely randomly.
Pair Corralation between FKS Food and Polychem Indonesia
Assuming the 90 days trading horizon FKS Food Sejahtera is expected to under-perform the Polychem Indonesia. But the stock apears to be less risky and, when comparing its historical volatility, FKS Food Sejahtera is 1.74 times less risky than Polychem Indonesia. The stock trades about -0.48 of its potential returns per unit of risk. The Polychem Indonesia Tbk is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest 12,700 in Polychem Indonesia Tbk on September 1, 2024 and sell it today you would lose (700.00) from holding Polychem Indonesia Tbk or give up 5.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
FKS Food Sejahtera vs. Polychem Indonesia Tbk
Performance |
| Timeline |
| FKS Food Sejahtera |
| Polychem Indonesia Tbk |
FKS Food and Polychem Indonesia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FKS Food and Polychem Indonesia
The main advantage of trading using opposite FKS Food and Polychem Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FKS Food position performs unexpectedly, Polychem Indonesia 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 Polychem Indonesia will offset losses from the drop in Polychem Indonesia's long position.| FKS Food vs. Bank BRISyariah Tbk | FKS Food vs. Mitra Pinasthika Mustika | FKS Food vs. Jakarta Int Hotels | FKS Food vs. Indosterling Technomedia Tbk |
| Polychem Indonesia vs. Perusahaan Gas Negara | Polychem Indonesia vs. Telkom Indonesia Tbk | Polychem Indonesia vs. Mitra Pinasthika Mustika | Polychem Indonesia vs. Jakarta Int Hotels |
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 CEOs Directory module to screen CEOs from public companies around the world.
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