Correlation Between Insurance Australia and PT Indofood
Can any of the company-specific risk be diversified away by investing in both Insurance Australia and PT Indofood 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 Insurance Australia and PT Indofood into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Insurance Australia Group and PT Indofood Sukses, you can compare the effects of market volatilities on Insurance Australia and PT Indofood 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 Insurance Australia with a short position of PT Indofood. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insurance Australia and PT Indofood.
Diversification Opportunities for Insurance Australia and PT Indofood
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Insurance and ISM is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and PT Indofood Sukses in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Indofood Sukses and Insurance Australia 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 Insurance Australia Group are associated (or correlated) with PT Indofood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Indofood Sukses has no effect on the direction of Insurance Australia i.e., Insurance Australia and PT Indofood go up and down completely randomly.
Pair Corralation between Insurance Australia and PT Indofood
Assuming the 90 days horizon Insurance Australia is expected to generate 1.01 times less return on investment than PT Indofood. But when comparing it to its historical volatility, Insurance Australia Group is 2.35 times less risky than PT Indofood. It trades about 0.1 of its potential returns per unit of risk. PT Indofood Sukses is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 36.00 in PT Indofood Sukses on September 15, 2024 and sell it today you would earn a total of 11.00 from holding PT Indofood Sukses or generate 30.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Insurance Australia Group vs. PT Indofood Sukses
Performance |
| Timeline |
| Insurance Australia |
| PT Indofood Sukses |
Insurance Australia and PT Indofood Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insurance Australia and PT Indofood
The main advantage of trading using opposite Insurance Australia and PT Indofood positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insurance Australia position performs unexpectedly, PT Indofood 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 PT Indofood will offset losses from the drop in PT Indofood's long position.| Insurance Australia vs. Superior Plus Corp | Insurance Australia vs. SIVERS SEMICONDUCTORS AB | Insurance Australia vs. CHINA HUARONG ENERHD 50 | Insurance Australia vs. NORDIC HALIBUT AS |
| PT Indofood vs. Hormel Foods | PT Indofood vs. Superior Plus Corp | PT Indofood vs. SIVERS SEMICONDUCTORS AB | PT Indofood vs. NorAm Drilling AS |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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