Correlation Between PT Indofood and Krakatau Steel
Can any of the company-specific risk be diversified away by investing in both PT Indofood and Krakatau Steel 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 Krakatau Steel 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 Krakatau Steel Persero, you can compare the effects of market volatilities on PT Indofood and Krakatau Steel 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 Krakatau Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Indofood and Krakatau Steel.
Diversification Opportunities for PT Indofood and Krakatau Steel
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between INDF and Krakatau is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding PT Indofood Sukses and Krakatau Steel Persero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Krakatau Steel Persero 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 Krakatau Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Krakatau Steel Persero has no effect on the direction of PT Indofood i.e., PT Indofood and Krakatau Steel go up and down completely randomly.
Pair Corralation between PT Indofood and Krakatau Steel
Assuming the 90 days trading horizon PT Indofood Sukses is expected to generate 0.68 times more return on investment than Krakatau Steel. However, PT Indofood Sukses is 1.47 times less risky than Krakatau Steel. It trades about 0.04 of its potential returns per unit of risk. Krakatau Steel Persero is currently generating about -0.23 per unit of risk. If you would invest 745,000 in PT Indofood Sukses on September 3, 2024 and sell it today you would earn a total of 7,500 from holding PT Indofood Sukses or generate 1.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PT Indofood Sukses vs. Krakatau Steel Persero
Performance |
| Timeline |
| PT Indofood Sukses |
| Krakatau Steel Persero |
PT Indofood and Krakatau Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PT Indofood and Krakatau Steel
The main advantage of trading using opposite PT Indofood and Krakatau Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Indofood position performs unexpectedly, Krakatau Steel 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 Krakatau Steel will offset losses from the drop in Krakatau Steel'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 |
| Krakatau Steel vs. Timah Persero Tbk | Krakatau Steel vs. Semen Indonesia Persero | Krakatau Steel vs. Mitra Pinasthika Mustika | Krakatau Steel vs. Jakarta Int Hotels |
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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