Correlation Between PT Indofood and Lautan Luas
Can any of the company-specific risk be diversified away by investing in both PT Indofood and Lautan Luas 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 Lautan Luas 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 Lautan Luas Tbk, you can compare the effects of market volatilities on PT Indofood and Lautan Luas 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 Lautan Luas. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Indofood and Lautan Luas.
Diversification Opportunities for PT Indofood and Lautan Luas
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between INDF and Lautan is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding PT Indofood Sukses and Lautan Luas Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lautan Luas Tbk 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 Lautan Luas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lautan Luas Tbk has no effect on the direction of PT Indofood i.e., PT Indofood and Lautan Luas go up and down completely randomly.
Pair Corralation between PT Indofood and Lautan Luas
Assuming the 90 days trading horizon PT Indofood Sukses is expected to generate 3.6 times more return on investment than Lautan Luas. However, PT Indofood is 3.6 times more volatile than Lautan Luas Tbk. It trades about -0.01 of its potential returns per unit of risk. Lautan Luas Tbk is currently generating about -0.04 per unit of risk. If you would invest 760,000 in PT Indofood Sukses on September 1, 2024 and sell it today you would lose (5,000) from holding PT Indofood Sukses or give up 0.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PT Indofood Sukses vs. Lautan Luas Tbk
Performance |
| Timeline |
| PT Indofood Sukses |
| Lautan Luas Tbk |
PT Indofood and Lautan Luas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PT Indofood and Lautan Luas
The main advantage of trading using opposite PT Indofood and Lautan Luas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Indofood position performs unexpectedly, Lautan Luas 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 Lautan Luas will offset losses from the drop in Lautan Luas' long position.| PT Indofood vs. Bank BRISyariah Tbk | PT Indofood vs. Mitra Pinasthika Mustika | PT Indofood vs. Jakarta Int Hotels | PT Indofood vs. Indosterling Technomedia Tbk |
| Lautan Luas vs. Lion Metal Works | Lautan Luas vs. PT Indofood Sukses | Lautan Luas vs. Cisarua Mountain Dairy | Lautan Luas vs. Indofood Cbp Sukses |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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