Correlation Between INDOFOOD AGRI and ARISTOCRAT LEISURE
Can any of the company-specific risk be diversified away by investing in both INDOFOOD AGRI and ARISTOCRAT LEISURE 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 ARISTOCRAT LEISURE 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 ARISTOCRAT LEISURE, you can compare the effects of market volatilities on INDOFOOD AGRI and ARISTOCRAT LEISURE 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 ARISTOCRAT LEISURE. Check out your portfolio center. Please also check ongoing floating volatility patterns of INDOFOOD AGRI and ARISTOCRAT LEISURE.
Diversification Opportunities for INDOFOOD AGRI and ARISTOCRAT LEISURE
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between INDOFOOD and ARISTOCRAT is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding INDOFOOD AGRI RES and ARISTOCRAT LEISURE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARISTOCRAT LEISURE 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 ARISTOCRAT LEISURE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARISTOCRAT LEISURE has no effect on the direction of INDOFOOD AGRI i.e., INDOFOOD AGRI and ARISTOCRAT LEISURE go up and down completely randomly.
Pair Corralation between INDOFOOD AGRI and ARISTOCRAT LEISURE
Assuming the 90 days trading horizon INDOFOOD AGRI is expected to generate 2.14 times less return on investment than ARISTOCRAT LEISURE. In addition to that, INDOFOOD AGRI is 2.03 times more volatile than ARISTOCRAT LEISURE. It trades about 0.03 of its total potential returns per unit of risk. ARISTOCRAT LEISURE is currently generating about 0.15 per unit of volatility. If you would invest 2,235 in ARISTOCRAT LEISURE on August 31, 2024 and sell it today you would earn a total of 1,925 from holding ARISTOCRAT LEISURE or generate 86.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.74% |
| Values | Daily Returns |
INDOFOOD AGRI RES vs. ARISTOCRAT LEISURE
Performance |
| Timeline |
| INDOFOOD AGRI RES |
| ARISTOCRAT LEISURE |
INDOFOOD AGRI and ARISTOCRAT LEISURE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with INDOFOOD AGRI and ARISTOCRAT LEISURE
The main advantage of trading using opposite INDOFOOD AGRI and ARISTOCRAT LEISURE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INDOFOOD AGRI position performs unexpectedly, ARISTOCRAT LEISURE 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 ARISTOCRAT LEISURE will offset losses from the drop in ARISTOCRAT LEISURE's long position.| INDOFOOD AGRI vs. SIVERS SEMICONDUCTORS AB | INDOFOOD AGRI vs. Darden Restaurants | INDOFOOD AGRI vs. Reliance Steel Aluminum | INDOFOOD AGRI vs. Q2M Managementberatung AG |
| ARISTOCRAT LEISURE vs. SIVERS SEMICONDUCTORS AB | ARISTOCRAT LEISURE vs. Darden Restaurants | ARISTOCRAT LEISURE vs. Reliance Steel Aluminum | ARISTOCRAT LEISURE vs. Q2M Managementberatung AG |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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