Correlation Between Rumble and Indofood CBP
Can any of the company-specific risk be diversified away by investing in both Rumble and Indofood CBP 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 Rumble and Indofood CBP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rumble Inc and Indofood CBP Sukses, you can compare the effects of market volatilities on Rumble and Indofood CBP 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 Rumble with a short position of Indofood CBP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rumble and Indofood CBP.
Diversification Opportunities for Rumble and Indofood CBP
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Rumble and Indofood is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Rumble Inc and Indofood CBP Sukses in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indofood CBP Sukses and Rumble 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 Rumble Inc are associated (or correlated) with Indofood CBP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indofood CBP Sukses has no effect on the direction of Rumble i.e., Rumble and Indofood CBP go up and down completely randomly.
Pair Corralation between Rumble and Indofood CBP
Considering the 90-day investment horizon Rumble Inc is expected to generate 2.78 times more return on investment than Indofood CBP. However, Rumble is 2.78 times more volatile than Indofood CBP Sukses. It trades about 0.25 of its potential returns per unit of risk. Indofood CBP Sukses is currently generating about -0.21 per unit of risk. If you would invest 615.00 in Rumble Inc on September 14, 2024 and sell it today you would earn a total of 199.00 from holding Rumble Inc or generate 32.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Rumble Inc vs. Indofood CBP Sukses
Performance |
| Timeline |
| Rumble Inc |
| Indofood CBP Sukses |
Rumble and Indofood CBP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rumble and Indofood CBP
The main advantage of trading using opposite Rumble and Indofood CBP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rumble position performs unexpectedly, Indofood CBP 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 CBP will offset losses from the drop in Indofood CBP's long position.The idea behind Rumble Inc and Indofood CBP Sukses 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.| Indofood CBP vs. Indofood Sukses Makmur | Indofood CBP vs. First Pacific | Indofood CBP vs. Grupo Herdez SAB | Indofood CBP vs. Fraser and Neave |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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