Correlation Between PT Indofood and Methode Electronics
Can any of the company-specific risk be diversified away by investing in both PT Indofood and Methode Electronics 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 Methode Electronics 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 Methode Electronics, you can compare the effects of market volatilities on PT Indofood and Methode Electronics 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 Methode Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Indofood and Methode Electronics.
Diversification Opportunities for PT Indofood and Methode Electronics
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between ISM and Methode is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding PT Indofood Sukses and Methode Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Methode Electronics 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 Methode Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Methode Electronics has no effect on the direction of PT Indofood i.e., PT Indofood and Methode Electronics go up and down completely randomly.
Pair Corralation between PT Indofood and Methode Electronics
Assuming the 90 days horizon PT Indofood is expected to generate 1.16 times less return on investment than Methode Electronics. But when comparing it to its historical volatility, PT Indofood Sukses is 1.13 times less risky than Methode Electronics. It trades about 0.08 of its potential returns per unit of risk. Methode Electronics is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 868.00 in Methode Electronics on September 4, 2024 and sell it today you would earn a total of 127.00 from holding Methode Electronics or generate 14.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.46% |
| Values | Daily Returns |
PT Indofood Sukses vs. Methode Electronics
Performance |
| Timeline |
| PT Indofood Sukses |
| Methode Electronics |
PT Indofood and Methode Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PT Indofood and Methode Electronics
The main advantage of trading using opposite PT Indofood and Methode Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Indofood position performs unexpectedly, Methode Electronics 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 Methode Electronics will offset losses from the drop in Methode Electronics' long position.| PT Indofood vs. Zurich Insurance Group | PT Indofood vs. ASURE SOFTWARE | PT Indofood vs. Unity Software | PT Indofood vs. Alfa Financial Software |
| Methode Electronics vs. Performance Food Group | Methode Electronics vs. CN MODERN DAIRY | Methode Electronics vs. PT Indofood Sukses | Methode Electronics vs. Astral Foods Limited |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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