Correlation Between PT Indofood and PEPKOR
Can any of the company-specific risk be diversified away by investing in both PT Indofood and PEPKOR 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 PEPKOR 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 PEPKOR LTD, you can compare the effects of market volatilities on PT Indofood and PEPKOR 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 PEPKOR. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT Indofood and PEPKOR.
Diversification Opportunities for PT Indofood and PEPKOR
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between ISM and PEPKOR is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding PT Indofood Sukses and PEPKOR LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PEPKOR LTD 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 PEPKOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PEPKOR LTD has no effect on the direction of PT Indofood i.e., PT Indofood and PEPKOR go up and down completely randomly.
Pair Corralation between PT Indofood and PEPKOR
Assuming the 90 days horizon PT Indofood is expected to generate 5.06 times less return on investment than PEPKOR. But when comparing it to its historical volatility, PT Indofood Sukses is 1.68 times less risky than PEPKOR. It trades about 0.02 of its potential returns per unit of risk. PEPKOR LTD is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 26.00 in PEPKOR LTD on September 5, 2024 and sell it today you would earn a total of 118.00 from holding PEPKOR LTD or generate 453.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PT Indofood Sukses vs. PEPKOR LTD
Performance |
| Timeline |
| PT Indofood Sukses |
| PEPKOR LTD |
PT Indofood and PEPKOR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PT Indofood and PEPKOR
The main advantage of trading using opposite PT Indofood and PEPKOR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Indofood position performs unexpectedly, PEPKOR 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 PEPKOR will offset losses from the drop in PEPKOR's long position.The idea behind PT Indofood Sukses and PEPKOR LTD pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| PEPKOR vs. PT Indofood Sukses | PEPKOR vs. NTG Nordic Transport | PEPKOR vs. Dairy Farm International | PEPKOR vs. BII Railway Transportation |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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