Correlation Between INDOFOOD AGRI and Westgold Resources
Can any of the company-specific risk be diversified away by investing in both INDOFOOD AGRI and Westgold Resources 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 INDOFOOD AGRI and Westgold Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between INDOFOOD AGRI RES and Westgold Resources, you can compare the effects of market volatilities on INDOFOOD AGRI and Westgold Resources 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 INDOFOOD AGRI with a short position of Westgold Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of INDOFOOD AGRI and Westgold Resources.
Diversification Opportunities for INDOFOOD AGRI and Westgold Resources
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between INDOFOOD and Westgold is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding INDOFOOD AGRI RES and Westgold Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westgold Resources and INDOFOOD AGRI 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 INDOFOOD AGRI RES are associated (or correlated) with Westgold Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westgold Resources has no effect on the direction of INDOFOOD AGRI i.e., INDOFOOD AGRI and Westgold Resources go up and down completely randomly.
Pair Corralation between INDOFOOD AGRI and Westgold Resources
Assuming the 90 days trading horizon INDOFOOD AGRI is expected to generate 4.58 times less return on investment than Westgold Resources. But when comparing it to its historical volatility, INDOFOOD AGRI RES is 1.73 times less risky than Westgold Resources. It trades about 0.02 of its potential returns per unit of risk. Westgold Resources is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 74.00 in Westgold Resources on October 11, 2024 and sell it today you would earn a total of 100.00 from holding Westgold Resources or generate 135.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
INDOFOOD AGRI RES vs. Westgold Resources
Performance |
| Timeline |
| INDOFOOD AGRI RES |
| Westgold Resources |
INDOFOOD AGRI and Westgold Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with INDOFOOD AGRI and Westgold Resources
The main advantage of trading using opposite INDOFOOD AGRI and Westgold Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INDOFOOD AGRI position performs unexpectedly, Westgold Resources 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 Westgold Resources will offset losses from the drop in Westgold Resources' long position.| INDOFOOD AGRI vs. Casio Computer CoLtd | INDOFOOD AGRI vs. APPLIED MATERIALS | INDOFOOD AGRI vs. Eagle Materials | INDOFOOD AGRI vs. GOODYEAR T RUBBER |
| Westgold Resources vs. ON SEMICONDUCTOR | Westgold Resources vs. Cogent Communications Holdings | Westgold Resources vs. SOCKET MOBILE NEW | Westgold Resources vs. T Mobile |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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