Correlation Between Air Lease and PT Indofood
Can any of the company-specific risk be diversified away by investing in both Air Lease and PT Indofood 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 Air Lease and PT Indofood into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Lease and PT Indofood Sukses, you can compare the effects of market volatilities on Air Lease and PT Indofood 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 Air Lease with a short position of PT Indofood. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Lease and PT Indofood.
Diversification Opportunities for Air Lease and PT Indofood
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Air and ISM is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease and PT Indofood Sukses in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Indofood Sukses and Air Lease 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 Air Lease are associated (or correlated) with PT Indofood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Indofood Sukses has no effect on the direction of Air Lease i.e., Air Lease and PT Indofood go up and down completely randomly.
Pair Corralation between Air Lease and PT Indofood
Assuming the 90 days trading horizon Air Lease is expected to generate 1.18 times less return on investment than PT Indofood. But when comparing it to its historical volatility, Air Lease is 2.13 times less risky than PT Indofood. It trades about 0.07 of its potential returns per unit of risk. PT Indofood Sukses is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 36.00 in PT Indofood Sukses on September 4, 2024 and sell it today you would earn a total of 7.00 from holding PT Indofood Sukses or generate 19.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Air Lease vs. PT Indofood Sukses
Performance |
| Timeline |
| Air Lease |
| PT Indofood Sukses |
Air Lease and PT Indofood Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Lease and PT Indofood
The main advantage of trading using opposite Air Lease and PT Indofood positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Lease position performs unexpectedly, PT Indofood 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 PT Indofood will offset losses from the drop in PT Indofood's long position.The idea behind Air Lease and PT Indofood Sukses 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.| PT Indofood vs. Zurich Insurance Group | PT Indofood vs. ASURE SOFTWARE | PT Indofood vs. Unity Software | PT Indofood vs. Alfa Financial Software |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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