Correlation Between INDOFOOD AGRI and PKSHA TECHNOLOGY
Can any of the company-specific risk be diversified away by investing in both INDOFOOD AGRI and PKSHA TECHNOLOGY 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 PKSHA TECHNOLOGY 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 PKSHA TECHNOLOGY INC, you can compare the effects of market volatilities on INDOFOOD AGRI and PKSHA TECHNOLOGY 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 PKSHA TECHNOLOGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of INDOFOOD AGRI and PKSHA TECHNOLOGY.
Diversification Opportunities for INDOFOOD AGRI and PKSHA TECHNOLOGY
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between INDOFOOD and PKSHA is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding INDOFOOD AGRI RES and PKSHA TECHNOLOGY INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PKSHA TECHNOLOGY INC 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 PKSHA TECHNOLOGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PKSHA TECHNOLOGY INC has no effect on the direction of INDOFOOD AGRI i.e., INDOFOOD AGRI and PKSHA TECHNOLOGY go up and down completely randomly.
Pair Corralation between INDOFOOD AGRI and PKSHA TECHNOLOGY
Assuming the 90 days trading horizon INDOFOOD AGRI RES is expected to generate 0.65 times more return on investment than PKSHA TECHNOLOGY. However, INDOFOOD AGRI RES is 1.53 times less risky than PKSHA TECHNOLOGY. It trades about 0.09 of its potential returns per unit of risk. PKSHA TECHNOLOGY INC is currently generating about 0.01 per unit of risk. If you would invest 21.00 in INDOFOOD AGRI RES on August 28, 2024 and sell it today you would earn a total of 1.00 from holding INDOFOOD AGRI RES or generate 4.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
INDOFOOD AGRI RES vs. PKSHA TECHNOLOGY INC
Performance |
| Timeline |
| INDOFOOD AGRI RES |
| PKSHA TECHNOLOGY INC |
INDOFOOD AGRI and PKSHA TECHNOLOGY Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with INDOFOOD AGRI and PKSHA TECHNOLOGY
The main advantage of trading using opposite INDOFOOD AGRI and PKSHA TECHNOLOGY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INDOFOOD AGRI position performs unexpectedly, PKSHA TECHNOLOGY 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 PKSHA TECHNOLOGY will offset losses from the drop in PKSHA TECHNOLOGY's long position.| INDOFOOD AGRI vs. Apple Inc | INDOFOOD AGRI vs. Apple Inc | INDOFOOD AGRI vs. Microsoft | INDOFOOD AGRI vs. Microsoft |
| PKSHA TECHNOLOGY vs. Hyster Yale Materials Handling | PKSHA TECHNOLOGY vs. EAGLE MATERIALS | PKSHA TECHNOLOGY vs. Applied Materials | PKSHA TECHNOLOGY vs. Rayonier Advanced Materials |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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