Correlation Between PT Indofood and Charoen Pokphand
Can any of the company-specific risk be diversified away by investing in both PT Indofood and Charoen Pokphand 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 Charoen Pokphand 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 Charoen Pokphand Indonesia, you can compare the effects of market volatilities on PT Indofood and Charoen Pokphand 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 Charoen Pokphand. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Indofood and Charoen Pokphand.
Diversification Opportunities for PT Indofood and Charoen Pokphand
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between INDF and Charoen is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding PT Indofood Sukses and Charoen Pokphand Indonesia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charoen Pokphand Ind 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 Charoen Pokphand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charoen Pokphand Ind has no effect on the direction of PT Indofood i.e., PT Indofood and Charoen Pokphand go up and down completely randomly.
Pair Corralation between PT Indofood and Charoen Pokphand
Assuming the 90 days trading horizon PT Indofood Sukses is expected to generate 0.93 times more return on investment than Charoen Pokphand. However, PT Indofood Sukses is 1.08 times less risky than Charoen Pokphand. It trades about 0.11 of its potential returns per unit of risk. Charoen Pokphand Indonesia is currently generating about -0.05 per unit of risk. If you would invest 682,500 in PT Indofood Sukses on August 28, 2024 and sell it today you would earn a total of 72,500 from holding PT Indofood Sukses or generate 10.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PT Indofood Sukses vs. Charoen Pokphand Indonesia
Performance |
| Timeline |
| PT Indofood Sukses |
| Charoen Pokphand Ind |
PT Indofood and Charoen Pokphand Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PT Indofood and Charoen Pokphand
The main advantage of trading using opposite PT Indofood and Charoen Pokphand positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Indofood position performs unexpectedly, Charoen Pokphand 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 Charoen Pokphand will offset losses from the drop in Charoen Pokphand'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 |
| Charoen Pokphand vs. Japfa Comfeed Indonesia | Charoen Pokphand vs. Kalbe Farma Tbk | Charoen Pokphand vs. PT Indofood Sukses | Charoen Pokphand vs. Semen Indonesia 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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