Correlation Between PT Indofood and Communication Cable
Can any of the company-specific risk be diversified away by investing in both PT Indofood and Communication Cable 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 PT Indofood and Communication Cable into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PT Indofood Sukses and Communication Cable Systems, you can compare the effects of market volatilities on PT Indofood and Communication Cable 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 PT Indofood with a short position of Communication Cable. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Indofood and Communication Cable.
Diversification Opportunities for PT Indofood and Communication Cable
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between INDF and Communication is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding PT Indofood Sukses and Communication Cable Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Communication Cable and PT Indofood 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 PT Indofood Sukses are associated (or correlated) with Communication Cable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Communication Cable has no effect on the direction of PT Indofood i.e., PT Indofood and Communication Cable go up and down completely randomly.
Pair Corralation between PT Indofood and Communication Cable
Assuming the 90 days trading horizon PT Indofood is expected to generate 6.68 times less return on investment than Communication Cable. But when comparing it to its historical volatility, PT Indofood Sukses is 3.17 times less risky than Communication Cable. It trades about 0.03 of its potential returns per unit of risk. Communication Cable Systems is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 24,600 in Communication Cable Systems on August 29, 2024 and sell it today you would earn a total of 1,400 from holding Communication Cable Systems or generate 5.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PT Indofood Sukses vs. Communication Cable Systems
Performance |
| Timeline |
| PT Indofood Sukses |
| Communication Cable |
PT Indofood and Communication Cable Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PT Indofood and Communication Cable
The main advantage of trading using opposite PT Indofood and Communication Cable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Indofood position performs unexpectedly, Communication Cable 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 Communication Cable will offset losses from the drop in Communication Cable's long position.| PT Indofood vs. Astra International Tbk | PT Indofood vs. Unilever Indonesia Tbk | PT Indofood vs. Telkom Indonesia Tbk | PT Indofood vs. Bank Mandiri Persero |
| Communication Cable vs. Berkah Prima Perkasa | Communication Cable vs. Hartadinata Abadi Tbk | Communication Cable vs. Estika Tata Tiara | Communication Cable vs. Garudafood Putra Putri |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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