Correlation Between IMPERIAL TOBACCO and INDOFOOD AGRI
Can any of the company-specific risk be diversified away by investing in both IMPERIAL TOBACCO and INDOFOOD AGRI 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 IMPERIAL TOBACCO and INDOFOOD AGRI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IMPERIAL TOBACCO and INDOFOOD AGRI RES, you can compare the effects of market volatilities on IMPERIAL TOBACCO and INDOFOOD AGRI 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 IMPERIAL TOBACCO with a short position of INDOFOOD AGRI. Check out your portfolio center. Please also check ongoing floating volatility patterns of IMPERIAL TOBACCO and INDOFOOD AGRI.
Diversification Opportunities for IMPERIAL TOBACCO and INDOFOOD AGRI
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IMPERIAL and INDOFOOD is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding IMPERIAL TOBACCO and INDOFOOD AGRI RES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INDOFOOD AGRI RES and IMPERIAL TOBACCO 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 IMPERIAL TOBACCO are associated (or correlated) with INDOFOOD AGRI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INDOFOOD AGRI RES has no effect on the direction of IMPERIAL TOBACCO i.e., IMPERIAL TOBACCO and INDOFOOD AGRI go up and down completely randomly.
Pair Corralation between IMPERIAL TOBACCO and INDOFOOD AGRI
Assuming the 90 days trading horizon IMPERIAL TOBACCO is expected to generate 0.55 times more return on investment than INDOFOOD AGRI. However, IMPERIAL TOBACCO is 1.81 times less risky than INDOFOOD AGRI. It trades about 0.47 of its potential returns per unit of risk. INDOFOOD AGRI RES is currently generating about 0.01 per unit of risk. If you would invest 2,760 in IMPERIAL TOBACCO on September 3, 2024 and sell it today you would earn a total of 319.00 from holding IMPERIAL TOBACCO or generate 11.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
IMPERIAL TOBACCO vs. INDOFOOD AGRI RES
Performance |
| Timeline |
| IMPERIAL TOBACCO |
| INDOFOOD AGRI RES |
IMPERIAL TOBACCO and INDOFOOD AGRI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IMPERIAL TOBACCO and INDOFOOD AGRI
The main advantage of trading using opposite IMPERIAL TOBACCO and INDOFOOD AGRI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IMPERIAL TOBACCO position performs unexpectedly, INDOFOOD AGRI 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 INDOFOOD AGRI will offset losses from the drop in INDOFOOD AGRI's long position.| IMPERIAL TOBACCO vs. Gamma Communications plc | IMPERIAL TOBACCO vs. WisdomTree Investments | IMPERIAL TOBACCO vs. Strategic Investments AS | IMPERIAL TOBACCO vs. ECHO INVESTMENT ZY |
| INDOFOOD AGRI vs. TOTAL GABON | INDOFOOD AGRI vs. Walgreens Boots Alliance | INDOFOOD AGRI vs. Peak Resources 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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