Correlation Between TFS FINANCIAL and INDOFOOD AGRI
Can any of the company-specific risk be diversified away by investing in both TFS FINANCIAL 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 TFS FINANCIAL and INDOFOOD AGRI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TFS FINANCIAL and INDOFOOD AGRI RES, you can compare the effects of market volatilities on TFS FINANCIAL 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 TFS FINANCIAL with a short position of INDOFOOD AGRI. Check out your portfolio center. Please also check ongoing floating volatility patterns of TFS FINANCIAL and INDOFOOD AGRI.
Diversification Opportunities for TFS FINANCIAL and INDOFOOD AGRI
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between TFS and INDOFOOD is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding TFS FINANCIAL 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 TFS FINANCIAL 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 TFS FINANCIAL 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 TFS FINANCIAL i.e., TFS FINANCIAL and INDOFOOD AGRI go up and down completely randomly.
Pair Corralation between TFS FINANCIAL and INDOFOOD AGRI
Assuming the 90 days trading horizon TFS FINANCIAL is expected to generate 1.06 times less return on investment than INDOFOOD AGRI. But when comparing it to its historical volatility, TFS FINANCIAL is 1.49 times less risky than INDOFOOD AGRI. It trades about 0.05 of its potential returns per unit of risk. INDOFOOD AGRI RES is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 18.00 in INDOFOOD AGRI RES on September 2, 2024 and sell it today you would earn a total of 4.00 from holding INDOFOOD AGRI RES or generate 22.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
TFS FINANCIAL vs. INDOFOOD AGRI RES
Performance |
| Timeline |
| TFS FINANCIAL |
| INDOFOOD AGRI RES |
TFS FINANCIAL and INDOFOOD AGRI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TFS FINANCIAL and INDOFOOD AGRI
The main advantage of trading using opposite TFS FINANCIAL and INDOFOOD AGRI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TFS FINANCIAL 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.| TFS FINANCIAL vs. SIVERS SEMICONDUCTORS AB | TFS FINANCIAL vs. Darden Restaurants | TFS FINANCIAL vs. Reliance Steel Aluminum | TFS FINANCIAL vs. Q2M Managementberatung AG |
| INDOFOOD AGRI vs. SIVERS SEMICONDUCTORS AB | INDOFOOD AGRI vs. Darden Restaurants | INDOFOOD AGRI vs. Reliance Steel Aluminum | INDOFOOD AGRI vs. Q2M Managementberatung AG |
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 CEOs Directory module to screen CEOs from public companies around the world.
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