Correlation Between Fast Food and Citra Borneo
Can any of the company-specific risk be diversified away by investing in both Fast Food and Citra Borneo 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 Fast Food and Citra Borneo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fast Food Indonesia and Citra Borneo Utama, you can compare the effects of market volatilities on Fast Food and Citra Borneo 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 Fast Food with a short position of Citra Borneo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Food and Citra Borneo.
Diversification Opportunities for Fast Food and Citra Borneo
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Fast and Citra is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Fast Food Indonesia and Citra Borneo Utama in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citra Borneo Utama and Fast 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 Fast Food Indonesia are associated (or correlated) with Citra Borneo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citra Borneo Utama has no effect on the direction of Fast Food i.e., Fast Food and Citra Borneo go up and down completely randomly.
Pair Corralation between Fast Food and Citra Borneo
Assuming the 90 days trading horizon Fast Food Indonesia is expected to under-perform the Citra Borneo. But the stock apears to be less risky and, when comparing its historical volatility, Fast Food Indonesia is 1.08 times less risky than Citra Borneo. The stock trades about -0.26 of its potential returns per unit of risk. The Citra Borneo Utama is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest 130,500 in Citra Borneo Utama on September 2, 2024 and sell it today you would lose (24,500) from holding Citra Borneo Utama or give up 18.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fast Food Indonesia vs. Citra Borneo Utama
Performance |
| Timeline |
| Fast Food Indonesia |
| Citra Borneo Utama |
Fast Food and Citra Borneo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Food and Citra Borneo
The main advantage of trading using opposite Fast Food and Citra Borneo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Food position performs unexpectedly, Citra Borneo 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 Citra Borneo will offset losses from the drop in Citra Borneo's long position.| Fast Food vs. Hero Supermarket Tbk | Fast Food vs. Indoritel Makmur Internasional | Fast Food vs. Enseval Putra Megatrading | Fast Food vs. Fks Multi Agro |
| Citra Borneo vs. Habco Trans Maritima | Citra Borneo vs. PT Cilacap Samudera | Citra Borneo vs. PT Sari Kreasi | Citra Borneo vs. Autopedia Sukses Lestari |
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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