Correlation Between Bank Danamon and PT Indofood
Can any of the company-specific risk be diversified away by investing in both Bank Danamon 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 Bank Danamon and PT Indofood into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank Danamon Indonesia and PT Indofood Sukses, you can compare the effects of market volatilities on Bank Danamon 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 Bank Danamon with a short position of PT Indofood. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Danamon and PT Indofood.
Diversification Opportunities for Bank Danamon and PT Indofood
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Bank and INDF is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Bank Danamon Indonesia 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 Bank Danamon 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 Bank Danamon Indonesia 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 Bank Danamon i.e., Bank Danamon and PT Indofood go up and down completely randomly.
Pair Corralation between Bank Danamon and PT Indofood
Assuming the 90 days trading horizon Bank Danamon Indonesia is expected to under-perform the PT Indofood. But the stock apears to be less risky and, when comparing its historical volatility, Bank Danamon Indonesia is 2.11 times less risky than PT Indofood. The stock trades about -0.15 of its potential returns per unit of risk. The PT Indofood Sukses is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 747,500 in PT Indofood Sukses on November 2, 2024 and sell it today you would earn a total of 12,500 from holding PT Indofood Sukses or generate 1.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank Danamon Indonesia vs. PT Indofood Sukses
Performance |
| Timeline |
| Bank Danamon Indonesia |
| PT Indofood Sukses |
Bank Danamon and PT Indofood Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank Danamon and PT Indofood
The main advantage of trading using opposite Bank Danamon and PT Indofood positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Danamon 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.| Bank Danamon vs. Bank Cimb Niaga | Bank Danamon vs. Indosat Tbk | Bank Danamon vs. Astra Agro Lestari | Bank Danamon vs. Bank Mandiri Persero |
| PT Indofood vs. Astra International Tbk | PT Indofood vs. Unilever Indonesia Tbk | PT Indofood vs. Telkom Indonesia Tbk | PT Indofood vs. Bank Mandiri Persero |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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