Correlation Between INDOFOOD AGRI and Algonquin Power
Can any of the company-specific risk be diversified away by investing in both INDOFOOD AGRI and Algonquin Power 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 Algonquin Power 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 Algonquin Power Utilities, you can compare the effects of market volatilities on INDOFOOD AGRI and Algonquin Power 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 Algonquin Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of INDOFOOD AGRI and Algonquin Power.
Diversification Opportunities for INDOFOOD AGRI and Algonquin Power
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between INDOFOOD and Algonquin is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding INDOFOOD AGRI RES and Algonquin Power Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algonquin Power Utilities 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 Algonquin Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algonquin Power Utilities has no effect on the direction of INDOFOOD AGRI i.e., INDOFOOD AGRI and Algonquin Power go up and down completely randomly.
Pair Corralation between INDOFOOD AGRI and Algonquin Power
Assuming the 90 days trading horizon INDOFOOD AGRI RES is expected to generate 1.15 times more return on investment than Algonquin Power. However, INDOFOOD AGRI is 1.15 times more volatile than Algonquin Power Utilities. It trades about 0.02 of its potential returns per unit of risk. Algonquin Power Utilities is currently generating about -0.02 per unit of risk. If you would invest 19.00 in INDOFOOD AGRI RES on October 11, 2024 and sell it today you would earn a total of 3.00 from holding INDOFOOD AGRI RES or generate 15.79% 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. Algonquin Power Utilities
Performance |
| Timeline |
| INDOFOOD AGRI RES |
| Algonquin Power Utilities |
INDOFOOD AGRI and Algonquin Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with INDOFOOD AGRI and Algonquin Power
The main advantage of trading using opposite INDOFOOD AGRI and Algonquin Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INDOFOOD AGRI position performs unexpectedly, Algonquin Power 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 Algonquin Power will offset losses from the drop in Algonquin Power's long position.| INDOFOOD AGRI vs. PACIFIC ONLINE | INDOFOOD AGRI vs. BJs Restaurants | INDOFOOD AGRI vs. SYSTEMAIR AB | INDOFOOD AGRI vs. ETFS Coffee ETC |
| Algonquin Power vs. SOGECLAIR SA INH | Algonquin Power vs. INDOFOOD AGRI RES | Algonquin Power vs. GWILLI FOOD | Algonquin Power vs. SEALED AIR |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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