Correlation Between PT Indofood and Lion Metal
Can any of the company-specific risk be diversified away by investing in both PT Indofood and Lion Metal 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 Lion Metal 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 Lion Metal Works, you can compare the effects of market volatilities on PT Indofood and Lion Metal 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 Lion Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Indofood and Lion Metal.
Diversification Opportunities for PT Indofood and Lion Metal
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between INDF and Lion is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding PT Indofood Sukses and Lion Metal Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lion Metal Works 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 Lion Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lion Metal Works has no effect on the direction of PT Indofood i.e., PT Indofood and Lion Metal go up and down completely randomly.
Pair Corralation between PT Indofood and Lion Metal
Assuming the 90 days trading horizon PT Indofood Sukses is expected to under-perform the Lion Metal. But the stock apears to be less risky and, when comparing its historical volatility, PT Indofood Sukses is 4.99 times less risky than Lion Metal. The stock trades about 0.0 of its potential returns per unit of risk. The Lion Metal Works is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 35,000 in Lion Metal Works on October 21, 2024 and sell it today you would earn a total of 0.00 from holding Lion Metal Works or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PT Indofood Sukses vs. Lion Metal Works
Performance |
| Timeline |
| PT Indofood Sukses |
| Lion Metal Works |
PT Indofood and Lion Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PT Indofood and Lion Metal
The main advantage of trading using opposite PT Indofood and Lion Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Indofood position performs unexpectedly, Lion Metal 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 Lion Metal will offset losses from the drop in Lion Metal'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 |
| Lion Metal vs. Lionmesh Prima Tbk | Lion Metal vs. Pelangi Indah Canindo | Lion Metal vs. Indal Aluminium Industry | Lion Metal vs. Intanwijaya Internasional 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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