Correlation Between Fast Food and Indonesian Paradise
Can any of the company-specific risk be diversified away by investing in both Fast Food and Indonesian Paradise 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 Indonesian Paradise 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 Indonesian Paradise Property, you can compare the effects of market volatilities on Fast Food and Indonesian Paradise 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 Indonesian Paradise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Food and Indonesian Paradise.
Diversification Opportunities for Fast Food and Indonesian Paradise
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Fast and Indonesian is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Fast Food Indonesia and Indonesian Paradise Property in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indonesian Paradise 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 Indonesian Paradise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indonesian Paradise has no effect on the direction of Fast Food i.e., Fast Food and Indonesian Paradise go up and down completely randomly.
Pair Corralation between Fast Food and Indonesian Paradise
Assuming the 90 days trading horizon Fast Food Indonesia is expected to under-perform the Indonesian Paradise. But the stock apears to be less risky and, when comparing its historical volatility, Fast Food Indonesia is 1.13 times less risky than Indonesian Paradise. The stock trades about -0.27 of its potential returns per unit of risk. The Indonesian Paradise Property is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 106,000 in Indonesian Paradise Property on September 3, 2024 and sell it today you would lose (11,500) from holding Indonesian Paradise Property or give up 10.85% 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. Indonesian Paradise Property
Performance |
| Timeline |
| Fast Food Indonesia |
| Indonesian Paradise |
Fast Food and Indonesian Paradise Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Food and Indonesian Paradise
The main advantage of trading using opposite Fast Food and Indonesian Paradise positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Food position performs unexpectedly, Indonesian Paradise 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 Indonesian Paradise will offset losses from the drop in Indonesian Paradise's long position.| Fast Food vs. Mitra Pinasthika Mustika | Fast Food vs. Jakarta Int Hotels | Fast Food vs. Asuransi Harta Aman | Fast Food vs. Indosterling Technomedia Tbk |
| Indonesian Paradise vs. Jakarta Setiabudi Internasional | Indonesian Paradise vs. Island Concepts Indonesia | Indonesian Paradise vs. Inter Delta Tbk | Indonesian Paradise vs. Bayu Buana Tbk |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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