Correlation Between INDOFOOD AGRI and AIR PRODCHEMICALS
Can any of the company-specific risk be diversified away by investing in both INDOFOOD AGRI and AIR PRODCHEMICALS 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 AIR PRODCHEMICALS 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 AIR PRODCHEMICALS, you can compare the effects of market volatilities on INDOFOOD AGRI and AIR PRODCHEMICALS 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 AIR PRODCHEMICALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of INDOFOOD AGRI and AIR PRODCHEMICALS.
Diversification Opportunities for INDOFOOD AGRI and AIR PRODCHEMICALS
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between INDOFOOD and AIR is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding INDOFOOD AGRI RES and AIR PRODCHEMICALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIR PRODCHEMICALS 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 AIR PRODCHEMICALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIR PRODCHEMICALS has no effect on the direction of INDOFOOD AGRI i.e., INDOFOOD AGRI and AIR PRODCHEMICALS go up and down completely randomly.
Pair Corralation between INDOFOOD AGRI and AIR PRODCHEMICALS
Assuming the 90 days trading horizon INDOFOOD AGRI is expected to generate 4.03 times less return on investment than AIR PRODCHEMICALS. In addition to that, INDOFOOD AGRI is 2.22 times more volatile than AIR PRODCHEMICALS. It trades about 0.01 of its total potential returns per unit of risk. AIR PRODCHEMICALS is currently generating about 0.12 per unit of volatility. If you would invest 30,350 in AIR PRODCHEMICALS on August 25, 2024 and sell it today you would earn a total of 1,000.00 from holding AIR PRODCHEMICALS or generate 3.29% 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. AIR PRODCHEMICALS
Performance |
| Timeline |
| INDOFOOD AGRI RES |
| AIR PRODCHEMICALS |
INDOFOOD AGRI and AIR PRODCHEMICALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with INDOFOOD AGRI and AIR PRODCHEMICALS
The main advantage of trading using opposite INDOFOOD AGRI and AIR PRODCHEMICALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INDOFOOD AGRI position performs unexpectedly, AIR PRODCHEMICALS 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 AIR PRODCHEMICALS will offset losses from the drop in AIR PRODCHEMICALS's long position.| INDOFOOD AGRI vs. Apple Inc | INDOFOOD AGRI vs. Apple Inc | INDOFOOD AGRI vs. Apple Inc | INDOFOOD AGRI vs. Apple Inc |
| AIR PRODCHEMICALS vs. Apple Inc | AIR PRODCHEMICALS vs. Apple Inc | AIR PRODCHEMICALS vs. Apple Inc | AIR PRODCHEMICALS vs. Apple Inc |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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