Correlation Between Indofood Cbp and Sawit Sumbermas
Can any of the company-specific risk be diversified away by investing in both Indofood Cbp and Sawit Sumbermas 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 Indofood Cbp and Sawit Sumbermas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Indofood Cbp Sukses and Sawit Sumbermas Sarana, you can compare the effects of market volatilities on Indofood Cbp and Sawit Sumbermas 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 Indofood Cbp with a short position of Sawit Sumbermas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indofood Cbp and Sawit Sumbermas.
Diversification Opportunities for Indofood Cbp and Sawit Sumbermas
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Indofood and Sawit is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Indofood Cbp Sukses and Sawit Sumbermas Sarana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sawit Sumbermas Sarana and Indofood Cbp 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 Indofood Cbp Sukses are associated (or correlated) with Sawit Sumbermas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sawit Sumbermas Sarana has no effect on the direction of Indofood Cbp i.e., Indofood Cbp and Sawit Sumbermas go up and down completely randomly.
Pair Corralation between Indofood Cbp and Sawit Sumbermas
Assuming the 90 days trading horizon Indofood Cbp Sukses is expected to generate 0.89 times more return on investment than Sawit Sumbermas. However, Indofood Cbp Sukses is 1.13 times less risky than Sawit Sumbermas. It trades about -0.16 of its potential returns per unit of risk. Sawit Sumbermas Sarana is currently generating about -0.31 per unit of risk. If you would invest 1,265,000 in Indofood Cbp Sukses on August 28, 2024 and sell it today you would lose (70,000) from holding Indofood Cbp Sukses or give up 5.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Indofood Cbp Sukses vs. Sawit Sumbermas Sarana
Performance |
| Timeline |
| Indofood Cbp Sukses |
| Sawit Sumbermas Sarana |
Indofood Cbp and Sawit Sumbermas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Indofood Cbp and Sawit Sumbermas
The main advantage of trading using opposite Indofood Cbp and Sawit Sumbermas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indofood Cbp position performs unexpectedly, Sawit Sumbermas 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 Sawit Sumbermas will offset losses from the drop in Sawit Sumbermas' long position.| Indofood Cbp vs. Unilever Indonesia Tbk | Indofood Cbp vs. PT Indofood Sukses | Indofood Cbp vs. Astra International Tbk | Indofood Cbp vs. Telkom Indonesia Tbk |
| Sawit Sumbermas vs. Surya Citra Media | Sawit Sumbermas vs. Matahari Department Store | Sawit Sumbermas vs. Salim Ivomas Pratama | Sawit Sumbermas vs. Akr Corporindo 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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