Correlation Between INDOFOOD AGRI and Lion Biotechnologies
Can any of the company-specific risk be diversified away by investing in both INDOFOOD AGRI and Lion Biotechnologies 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 Lion Biotechnologies 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 Lion Biotechnologies, you can compare the effects of market volatilities on INDOFOOD AGRI and Lion Biotechnologies 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 Lion Biotechnologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of INDOFOOD AGRI and Lion Biotechnologies.
Diversification Opportunities for INDOFOOD AGRI and Lion Biotechnologies
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between INDOFOOD and Lion is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding INDOFOOD AGRI RES and Lion Biotechnologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lion Biotechnologies 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 Lion Biotechnologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lion Biotechnologies has no effect on the direction of INDOFOOD AGRI i.e., INDOFOOD AGRI and Lion Biotechnologies go up and down completely randomly.
Pair Corralation between INDOFOOD AGRI and Lion Biotechnologies
Assuming the 90 days trading horizon INDOFOOD AGRI is expected to generate 3.56 times less return on investment than Lion Biotechnologies. But when comparing it to its historical volatility, INDOFOOD AGRI RES is 2.73 times less risky than Lion Biotechnologies. It trades about 0.03 of its potential returns per unit of risk. Lion Biotechnologies is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 735.00 in Lion Biotechnologies on September 1, 2024 and sell it today you would earn a total of 165.00 from holding Lion Biotechnologies or generate 22.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
INDOFOOD AGRI RES vs. Lion Biotechnologies
Performance |
| Timeline |
| INDOFOOD AGRI RES |
| Lion Biotechnologies |
INDOFOOD AGRI and Lion Biotechnologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with INDOFOOD AGRI and Lion Biotechnologies
The main advantage of trading using opposite INDOFOOD AGRI and Lion Biotechnologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INDOFOOD AGRI position performs unexpectedly, Lion Biotechnologies 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 Lion Biotechnologies will offset losses from the drop in Lion Biotechnologies' long position.| INDOFOOD AGRI vs. Playtech plc | INDOFOOD AGRI vs. GungHo Online Entertainment | INDOFOOD AGRI vs. TAL Education Group | INDOFOOD AGRI vs. CarsalesCom |
| Lion Biotechnologies vs. NIPPON STEEL SPADR | Lion Biotechnologies vs. Cleanaway Waste Management | Lion Biotechnologies vs. Pembina Pipeline Corp | Lion Biotechnologies vs. CosmoSteel Holdings 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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