Correlation Between INDOFOOD AGRI and Collins Foods
Can any of the company-specific risk be diversified away by investing in both INDOFOOD AGRI and Collins Foods 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 Collins Foods 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 Collins Foods Limited, you can compare the effects of market volatilities on INDOFOOD AGRI and Collins Foods 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 Collins Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of INDOFOOD AGRI and Collins Foods.
Diversification Opportunities for INDOFOOD AGRI and Collins Foods
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between INDOFOOD and Collins is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding INDOFOOD AGRI RES and Collins Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collins Foods Limited 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 Collins Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Collins Foods Limited has no effect on the direction of INDOFOOD AGRI i.e., INDOFOOD AGRI and Collins Foods go up and down completely randomly.
Pair Corralation between INDOFOOD AGRI and Collins Foods
Assuming the 90 days trading horizon INDOFOOD AGRI is expected to generate 19.7 times less return on investment than Collins Foods. In addition to that, INDOFOOD AGRI is 1.21 times more volatile than Collins Foods Limited. It trades about 0.01 of its total potential returns per unit of risk. Collins Foods Limited is currently generating about 0.23 per unit of volatility. If you would invest 490.00 in Collins Foods Limited on September 3, 2024 and sell it today you would earn a total of 40.00 from holding Collins Foods Limited or generate 8.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
INDOFOOD AGRI RES vs. Collins Foods Limited
Performance |
| Timeline |
| INDOFOOD AGRI RES |
| Collins Foods Limited |
INDOFOOD AGRI and Collins Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with INDOFOOD AGRI and Collins Foods
The main advantage of trading using opposite INDOFOOD AGRI and Collins Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INDOFOOD AGRI position performs unexpectedly, Collins Foods 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 Collins Foods will offset losses from the drop in Collins Foods' long position.| INDOFOOD AGRI vs. TOTAL GABON | INDOFOOD AGRI vs. Walgreens Boots Alliance | INDOFOOD AGRI vs. Peak Resources Limited |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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